When buying a home, the first thing people always want to know is, “How much do we save for the down payment?”. The real answer is that it is more complicated than that. There are also closing costs, reserves, up-front costs, and moving costs to consider. All of that comes even before you’ve priced new drapes or shades (your new home will not have those).

There are four main costs to consider when saving to buy a home.

Down payment: You may have heard you need 20% down, but that is not true. Typically, a first-time buyer will put 3% down, although there are programs, like USDA, for instance, that require zero down and other programs, and FHA, which require 3.5%.

Closing costs: This one often trips up prospective buyers. In addition to your down payment, you will need to have roughly 3-4% saved towards closing costs. These may include title fees, lender origination fees, the appraisal, and your escrow balance. Discount points, or an amount paid up front to the lender to lower the interest rate, will also be included in this amount.

Reserves: These are liquid assets (savings, for example) that could cover the mortgage payment for between two and six months. More rarely, you may be required to prove up to twelve months of reserves.  

Moving costs: Moving isn’t free! If you have rented, you know it can cost $1,000 and up to move everything you own from point A to point B, turn on all utilities, put up curtains that fit your new windows, and stock your fridge and pantry. If you’ve spent every dime to get into your new home and had just two months of reserves in your savings, things could be very tight.

If you are intent on becoming a homeowner soon, know your expenses, plan ahead, and good luck!Questions about qualifying as a first-time buyer? Call our Real Estate Lending Specialists at 503-588-0211, option 4, or book an appointment here.