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What to Save for When Buying Your Home

How to decide if you have enough savings to buy a home
Jan 13, 2025

Buying a home can feel overwhelming, especially when it comes to budgeting for all the associated costs. However, with a little understanding of the expenses you'll encounter, you can take charge of the process and make informed decisions.

Here are a few key considerations to keep in mind as you prepare:

1. Down Payment
Saving for your down payment is likely top of your list, but how much do you really need? Many people assume that a 20% down payment is required, but that's not always the case. Depending on the type of loan or lender, you may be able to put down as little as 3% or even 0%.

The amount you need to put down depends on several factors, including the loan type and your financial goals. If you don’t have a large down payment saved up, don’t worry—there are plenty of options available.

A knowledgeable mortgage professional can help you navigate different loan types, down payment requirements, and potential down payment assistance programs. The more you learn upfront, the smoother the process will be. Working with a professional ensures you get the best options for your situation.

2. Closing Costs
Don’t forget to account for closing costs, which include various fees paid to the parties involved in your transaction.

Mortgage closing costs are the fees associated with buying a home that you must pay on closing day. They typically range from as little as 1 but sometimes up to 5 percent of the total loan amount, covering fees for appraisal, title insurance, and loan origination and underwriting.

A trusted mortgage professional can walk you through the details and help you prepare for these costs, so you’re ready when it’s time to close. Additionally, remember to budget for your real estate agent’s fee, which might not always be covered by the seller. You'll discuss this in advance to ensure there are no surprises.

3. Earnest Money Deposit
Another cost to consider is the earnest money deposit (EMD). Typically ranging from 1% to 2% of the home's price, the EMD is a way to show the seller that you’re serious about your offer.

Earnest money shows the seller you're committed. If your offer is accepted, the EMD goes toward your down payment and closing costs, effectively paying part of those costs upfront.

The EMD is not an additional expense—it's simply part of the money you’ve already saved. However, keep in mind that it’s not required and doesn't guarantee your offer will be accepted. It’s important to work with a real estate advisor to understand the best approach for your situation and local market conditions.

Bottom Line
A successful homebuying strategy starts with understanding the costs you’ll need to save for. When you know what to expect, you can plan effectively. With the support of an experienced agent and a reliable lender, you’ll have the knowledge you need to move forward with confidence.

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