Lark Real Estate Group

Your Trusted Voice for
Real Estate in DFW

September 19, 2023

How much should I save for my first home?

When buying your first home, it’s important to have a solid understanding of your finances and how much you can afford to spend. The last thing you want is to be eating ramen noodles on the floor of your new home because you didn’t realize how much the whole process would cost. Keep reading to understand what is needed (and when!)

Generally, you need to think about your savings in 3 different buckets for your home purchase:

The first bucket, probably the one you already have been saving for, is the down payment. Contrary to what you may hear, you don’t have to have 20% to buy a home. There are loan programs that allow you to buy with as little as 3.5% down (FHA), 5% down (Conventional), and even 0% down (VA loans or USDA loans). To give you an idea, 3.5% down on a $400,000 home would be $14,000. This is the first item you should be saving for. 

The second bucket, consists of the lender costs and escrow items required to close. A good estimate of this would be 3% of the home price. This includes the closing costs associated with the lender and insurance, taxes, & title fees that will be collected at closing. In some markets, you can ask the Sellers to pay for some of this to help reduce your cash out of pocket. There are also some loan programs that may help you minimize your total cash out of pocket, as well. 

The third bucket is the one you need for your emergency fund, your moving expenses, and any repairs that you may want to make to the home when you move in (paint, flooring, new countertops, landscaping, etc). A good rule of thumb is to have about 3-6 months saved up of your total monthly expenses, just in case! A home is a living, breathing thing- you just never know when a hail storm will punch a hole through your skylight or your laundry machine floods the downstairs.

If you are reading this, you are already in the right mindset and I’m so glad you are game planning to better your financial future. Real Estate is a great investment and the Dallas-Fort Worth area continues to be one of the strongest real estate markets in the country!

If you found this helpful, book a call and let’s get started on the path to building your equity!