One question I get all the time is, “how much money should I save before buying a house?” And as far as questions go, it’s a pretty darn good one. Owning a house is a major goal in life for many people, and I completely understand.

In fact, I wanted to be a homeowner so bad I rushed into it before I was ready.

When my husband and I bought our first house, we weren’t necessarily in the right financial position to get started. But I just couldn’t wait! And while it wasn’t a total dumpster fire, I still want it to be a cautionary tale for you.

Learn from my mistakes and ensure you are completely financially ready to be a homeowner. And it starts with saving!

For first-time home buyers, there are many things to consider before buying a house. Before I started my house hunt, I knew that I needed to answer this all-important question first: how much money should I save before buying a house?

Because way before you can think about calling up a realtor and scheduling the movers, you need to start saving.

Know What You Can Really Afford

Before you even begin thinking about talking to a mortgage broker or your bank, break down your own costs first.

I couldn’t believe how much we were approved for in regards to the mortgage of our first home. It was way more than I knew we could realistically afford in terms of a monthly payment.

This is why it’s so important to have a grasp on the reality of paying a monthly mortgage. To do so, break down your monthly budget and see how much you can dedicate to paying a mortgage.

Make sure to leave room for some fun things like dinner dates and concert tickets, as well as your other financial goals, such as retirement and vacation funds. You also want to leave some buffer room and include room for fees such as insurance and maintenance costs (more on that later)!

Get An Estimate

Zillow is a good tool to start and get an estimate on what to expect. You can insert theoretical house prices, different down payments, interest rates, and mortgage length until you have a good grasp of what’s in your budget.

All in all, you don’t want to be house-poor. When a bank encourages you to spend more money than you can afford with a large mortgage, then you’re stuck in a tight bind.

If all your money goes into paying off your mortgage, then that’s all you’ll ever be worried about. You need to have a buffer room and money for other things in life.

It’s so important to shop around competitive mortgage rates! Even a half of a percent difference could save you a ton of money in the long run. Check out current mortgage rates based on different lenders below:

How Much Money Should I Save Before Buying A House?

Just about everywhere you look, you’ll hear that you need to save 20% for a down payment in order to buy a home. This is the golden number.

The reason for this percentage is that you won’t be required to pay private mortgage insurance (PMI). This protects the lender in the event that you cannot make your mortgage payments.

This fee is often required by mortgage lenders when you have a down payment of less than 20%. It can be an upfront fee or part of your monthly payment. For some buyers, this additional payment can really add up.

The Larger The Down Payment, The Better

Beyond avoiding paying PMI, the larger the down payment, the smaller your monthly payments will be. This also means you’ll be paying less monthly interest.

In fact, lenders are more likely to give you lower interest rates. And just like credit cards, interest is the real villain when it comes to paying off loans! A larger down payment is also likely to lead to you paying off your mortgage sooner.

The Down Payment Reality

While saving 20% certainly is ideal, it’s not the reality for most people. More often than you think, people have down payments much smaller. So if reading 20% has you bummed out and thinking that you’ll never be a homeowner, think again!

According to the National Association of Realtors, the median down payment for all buyers in 2019 was 12%. For returning home buyers, that number was 16%. And for first-time home buyers, only 6%. (Much lower than that golden down payment number!)

Your best bet is to speak with a local lender and see what options may be available. There are even special programs available, particularly for first-time buyers. 

Renting vs Mortgage

I understand the feeling of wanting a house of your own. When it comes to renting, it feels as though you get stuck in a hole of paying off someone else’s mortgage instead of your own. Plus, the feeling of really setting down roots and making a place your own is one that we all crave.

So here is my recommendation. Make sure your mortgage lies somewhere between 25-20% of your take-home pay. Similar to rent, your monthly housing payment should be no more than a third of your paycheck.

But as a homeowner, you have more costs to consider than a renter, so that’s why you want to get closer to 25%. This should include your taxes and insurance as well.

Other Down Payment Options

  • Traditional Loans – Most traditional loans only require 5% for a down payment. So if that’s all you can afford at the moment and are dying to get out of the rental black hole, you can still go to a typical mortgage lender and likely be approved for a loan.
  • FHA Loans – There are also loans from Federal Housing Administration (FHA). These are easier to get than a traditional loan as they are government-backed. They usually require you to put down a minimum of 3.5%
  • VA Loans – These types of loans are another incentive specifically for veterans and those who are current members of the armed forces. If you qualify, you won’t be required to have a down payment at all!
  • First-Time Homebuyers – Many states also have more incentives for first-time homebuyers. You can do some research online to see if you may qualify for additional help. A mortgage broker can also help you find the best deal for your circumstances.

Other Costs To Consider (Beyond The Down Payment)

When it comes to answering the question of how much money should I save before buying a house, there are many other costs you will want to consider beyond a down payment.

Some occur at the time of sale, and others are parts of being a homeowner. Here are some to keep in mind:

Property Taxes

As a homeowner, you will have to pay annual property taxes. Each year they change, either going up or down depending on the value of your property. Be sure to include some buffer room in your budget to account for property taxes.

If the previous homeowner has already paid the property taxes, you may have to reimburse them before you take ownership of the house.

Home Insurance

As a homeowner, you will want to ensure you have good home insurance to cover you should the unlikely happen. Most home insurance will cover expenses such as fire, flood, sewer backup, overland water protection, and personal liability.

First-time homebuyers may get special rates and incentives from certain insurance brokers, so be sure to keep an eye out for that!

Closing Costs

Between the lawyer and the lender, closing costs are any fees incurred before you get the keys to your home. They may include things such as the property appraisal, title insurance, and any kind of inspections you want before moving into the home.

The closing costs will vary depending on where you live and the type of loan you have. These costs can range anywhere from 3-6% of the total value of your loan.

Sometimes, the seller may agree to cover some of these closing costs in what is known as seller concessions.

Homeowners Association Fees

If you purchase a condo or townhouse, you will likely have to pay homeowners association fees (HAF). These cover the costs for maintenance and common areas, such as painting the lobby of the building or having a landscaping service mow the grass.

Depending on the amenities of your building, the fees can range greatly from a hundred dollars a month to a thousand.


Just like monthly mortgage payments, you will have to also pay utilities. Owning a home means you may see a larger increase in utilities than you were as a renter, especially if utilities were included in your rent or you move into a home from an apartment.

Renovations And Maintenance

The next time the fridge is broken, you can’t call the landlord to fix it! You will want to factor in a budget for regular maintenance costs and potential repairs for your home.

Even if you don’t spend it, hold onto it! When the time comes for a new roof, you’ll be happy you have savings for just that. A good rule of thumb is to save 1% of your home’s costs per year.

Emergency Fund

You should never use part of your emergency fund to pay for your down payment. When you’re a homeowner, you will potentially need it even more! If, say, the pipes burst, you will have the backup emergency funds to avoid debt and continue to make all your monthly payments.

And that should answer the question of how much money should I save before buying a house. All in all, it’s a different case for everyone. Know what you can afford, and then go and chase your home-owning dreams.

Happy house hunting!