A Complete Guide for First-Time Buyers Preparing to Buy a House
How to Budget for Down Payment, Closing Costs? Buying a home is exciting, but it also comes with several upfront expenses that many first-time buyers underestimate. Beyond the cost of the home itself, you’ll need to plan for your down payment, closing costs, and move-in expenses. Creating a detailed savings plan and understanding what lenders look for can save you stress, time, and money.
In this guide, we break down exactly how to budget for all three categories, what percentages to expect, where to find savings, and how first-time buyers can lower their upfront costs.
Whether you’re purchasing your first home or upgrading to a bigger space, knowing these numbers puts you in the best position to buy a house confidently.
What You Need to Budget For When Buying a Home
When planning to buy a home, you’ll need to prepare for three major categories:
● The down payment
● Closing costs
● Move in expenses
Each one requires its own savings strategy and home lenders will evaluate your readiness for all three before approving your mortgage loan.
1. Estimate Your Down Payment (3.5%–20%+)
When budgeting for a down payment, the percentage depends largely on the type of home loan you choose. Here’s what most buyers can expect:
Typical Down Payment Amounts
- FHA Loan: 3.5% (ideal for first-time buyers)
- Conventional Loan: 3%–20%
- VA & USDA Loans: 0% for eligible borrowers
- Jumbo Loans: 10%–20%+
To calculate it, multiply the purchase price by the required percentage.
Example: On a $300,000 home:
- 3.5% = $10,500
- 10% = $30,000
- 20% = $60,000
Lenders look at your down-payment savings as a sign of financial preparedness. Larger down payments also help you secure better mortgage loan rates and reduce monthly payments.
2. Estimate Your Closing Costs (2%–6% of Purchase Price)
Closing costs include all of the fees and services required to finalize your home purchase. These are one-time charges paid at closing, usually three days before settlement, and cover:
Common Closing Cost Items
- Lender origination fees
- Appraisal
- Title insurance
- Escrow fees
- Credit report
- Prepaid taxes & insurance
- Recording fees
Home lenders typically recommend budgeting 2%–6% of the purchase price for closing costs.
Example:
For a $300,000 home, closing costs may range from:
- $6,000 to $18,000
How to Lower Your Closing Costs
First-time buyers often overpay simply because they don’t know their options. You may reduce costs by:
- Asking the seller for closing-cost contributions
- Using first-time homebuyer programs for down payment or closing-cost assistance
- Comparing loan estimates from multiple lenders
- Choosing a home loan with reduced lender fees
- Closing at the end of the month to reduce prepaid interest
Important Note on Mortgage Insurance
If your down payment is less than 20%, mortgage insurance may be required. But this can often be financed into your mortgage, helping you avoid a huge upfront payment.
3. Budget for Move-In Expenses (Varies Widely)
After closing, many first-time buyers are surprised by how much they need to buy once they step into their new home. These expenses often fall outside the mortgage loan process but are still crucial to plan for.
Typical Move-In Expenses Include:
- Movers or rental truck
- New furniture
- Appliances (washer, dryer, fridge, etc.)
- Interior painting
- Locksmith services
- Window treatments
- Lighting updates
- Initial repairs
- Landscaping
- Cleaning fees
- Security system installation
Depending on the home’s condition, move-in expenses can range from $1,000 to $10,000+. Older homes often require more upfront repairs, while new construction typically has lower move-in costs.
Pro Tip:
Create a separate savings category specifically for move-in expenses. This helps avoid dipping into your emergency fund.
4. Bring All Costs Together Into One Complete Budget
Now that you have a clearer understanding of each category, it’s time to bring everything together.
Your Total Budget Should Include:
- Down payment
- Closing costs
- Move-in expenses
- A financial safety buffer
- Emergency fund (3 months of expenses minimum)
This gives lenders confidence that you are prepared not stretched and lowers your risk profile.
Example Calculation: For a $300,000 home:
| Expense Category | Estimated Amount |
| Down Payment (10%) | $30,000 |
| Closing Costs (4%) | $12,000 |
| Move-In Expenses | $3,000 |
| Total Savings Goal | $45,000 |
Most home lenders love seeing borrowers who prepare this way, it shows financial strength and reduces loan risk.
Understanding Closing Costs More Deeply
Closing costs are often the biggest surprise for first-time buyers. While many assume the down payment is the only major hurdle, closing fees can add up quickly.
What Closing Costs Do Not Usually Include
- Home insurance
- Property taxes
- Mortgage insurance (can often be financed)
- Home repairs
- Utility setup fees
These may be collected at closing but are separate from the 2%–6% calculation.
Closing costs are required by the lender, the title company, and state/local agencies, so planning early is crucial.
Understanding the Full Cost of Homeownership
Once you move in, the true financial responsibility of owning a home begins. Even brand-new homes require ongoing maintenance.
Common Post-Move Purchases
- Carpet replacement
- HVAC servicing
- Paint
- Tools for yard care
- Homeowner’s insurance
- Furnishings for additional rooms
A general rule:Plan to spend 1% of your home’s value per year on maintenance.
Why Budgeting Matters for Home Lenders
Every lender wants to see responsible money management. Your budget can affect:
- Mortgage loan approval
- Interest rate offered
- Loan program eligibility
- Required reserves
- Overall loan terms
When you show a well-structured budget with room for savings, lenders trust you more and approval becomes easier.
How to Prepare Before Applying
Before you speak to a home lender, prepare by:
- Checking your credit reports
- Saving at least 3% of the purchase price
- Reducing debt to lower your DTI
- Organizing bank statements
- Avoiding new credit accounts
- Increasing reserves when possible
This demonstrates readiness and financial strength—two qualities lenders value highly.
When to Ask for Professional Help
A mortgage professional can help you:
- Estimate true closing costs
- Determine the best loan program
- Evaluate your readiness
- Identify first-time buyer assistance programs
- Explain down payment requirements
- Calculate monthly payments
At First Nation Financial, we don’t just push paperwork—we partner with you, guide you step by step, and help you understand exactly what you need to do to qualify. We believe in second chances, creative solutions, and turning “not yet” into “let’s do this.”
So if you’ve been waiting until everything’s “perfect,” here’s your sign: it doesn’t have to be. What you need is someone who understands where you’re coming from—and knows how to get you where you want to go.
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Let’s turn your hard work into homeownership.
