Big goals, like a home.
Buying a home is one of the biggest money decisions most people make. Knowing the full cost ahead of time helps you choose a price that fits your life, not just the bank's approval.
More than the price
Down payment
Cash you pay up front. Some loans allow less than 20%, though a smaller down payment can mean extra costs like mortgage insurance.
Closing costs
Fees to finalize the purchase, often around 2% to 5% of the price.
Monthly costs
The mortgage payment, plus property taxes, insurance, and sometimes HOA fees.
Upkeep
Repairs and maintenance. A common rule of thumb is to set aside about 1% of the home's value each year.
Signs you may be ready
Your bills are steady and on time, high-interest debt is under control, and you'd still have an emergency cushion after paying the down payment and closing costs. A guideline many lenders use is keeping housing costs around 28% of your income before taxes. A lower share leaves more breathing room.
Example
Someone looks at a $250,000 home.
- 10% down: $25,000. Closing costs at about 3%: $7,500. Cash needed: about $32,500, plus their emergency cushion.
- A $225,000 loan at 6.5% for 30 years: about $1,422 a month, before taxes and insurance.
With taxes and insurance, the real monthly cost could be several hundred dollars more. Rates and costs vary, so these are estimates to plan with, not quotes.
Quick check
Besides the down payment, which costs come with buying a home?
Your next move
Use Homeownership GPS to see a comfortable price range for your income and how home values can grow. Track your progress in My Net Worth.
Finished this lesson?
Educational information, not financial advice. Examples are made up to show how the numbers work.