3 Costs Every Homebuyer Should Plan For

Let’s clear something up right away: You do not need 20% down and a massive savings account to buy a home. The truth? The amount of money you need depends on a few key factors, and it’s also more than just the down payment. That’s where most buyers get caught off guard. So let’s break down the three main costs every buyer should plan for.

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1. Down Payment: How Much Do You Actually Need?

Your down payment is simply the portion of the home price you pay upfront. And despite what you’ve probably heard, there’s no one “required” amount. It depends on your loan type, not some unwritten rule.

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Common Down Payment Options

3%-3.5% – FHA and some first-time buyer conventional loans
5%–10% – Conventional loans
20% – Totally optional (it helps you avoid PMI, but it’s not required)

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Here’s the part that surprises most people: Most buyers today are putting 3–5% down, not 20%.

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2. Closing Costs: The “Oh… I Didn’t Know About That” Expense

Closing costs are the fees required to actually finalize the purchase and your mortgage. They’re separate from your down payment, and this is the line item most buyers forget to plan for. Typically, closing costs run about 2%–3% of the purchase price.

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What’s Included in Closing Costs?‍

• Loan origination fees
• Appraisal and credit report
• Title and escrow fees
• Prepaid property taxes and homeowners insurance

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Here’s the good news: Closing costs are often negotiable. In many cases, sellers can help cover part (or sometimes all) of them through seller concessions, which can significantly reduce how much cash you need upfront. This is where strategy and a good agent really matters (if you decide to hire one)!

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3. Cash Reserves: What Lenders (and Life) Expect

Cash reserves are the money you still have left over after closing. Some loan programs require them, and even when they don’t, having reserves is just smart. Because life happens.

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Typical Reserve Guideline: 1–3 months of total housing payments. That includes principal, interest, taxes, and insurance.

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Think of reserves as your buffer. This is for unexpected repairs, job changes, or just peace of mind during your first few months of homeownership. The goal isn’t to drain your bank account to zero just to buy a house.

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Most buyers don’t need 20% down — but they do need a plan. If you understand:

1) Your down payment options
2) Your expected closing costs
3) And how much cushion you want to keep

…buying a home becomes way less intimidating and a lot more manageable.

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Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.