Expenses First Time Home Buyers Need to Save For

If you're getting ready to buy your first home, there are a few key expenses to prepare for before you reach the closing table. Some costs need to be covered even before you start searching for a home. Here are five major expenses first-time homebuyers should save for:

1. Down Payment

The down payment is often the largest expense for first-time homebuyers. For a conventional mortgage, you’ll need between 3% and 20% of the purchase price. A lower down payment (below 20%) typically requires mortgage insurance. If saving 20% isn’t feasible, consider low or no down payment options like FHA, USDA, or VA loans, as long as you meet the requirements.

2. Closing Costs

At closing, you'll pay legal and processing fees known as closing costs. These include expenses like the appraisal, title insurance, and legal fees, which are listed on your Closing Disclosure document. Closing costs usually range from 3% to 6% of the loan value, depending on the complexity of the purchase.

3. Home Repairs and Maintenance

As a homeowner, you're responsible for repairs and maintenance. Unlike renting, where you can call a landlord, you’ll need to cover these costs yourself. It’s a good idea to have an emergency fund for unexpected repairs to avoid going into debt.

4. Furnishing Your Home

If your new home is larger than your previous place, you may want new furniture. Saving ahead of time will make this expense more manageable. Don’t forget that appliances, which may not be included, can also be a significant cost.

5. Homeowners’ Association (HOA) Fees

If your home is part of a homeowners’ association, you’ll be responsible for monthly dues and any special assessments. These fees can range from $100 to $500 or more, depending on your area and the amenities provided. In some high-cost areas, HOA fees can be nearly as much as your mortgage!