You’re tired of throwing away money for rent. You want to become a homeowner and create a cozy environment, where you can make memories with your family for years to come. You may even find yourself on Zillow drooling over all the cute houses in your neighborhood that could be yours!

There’s only one little roadblock – you’re going to need some cash to buy a house. How much do you need to save? That’s the exact question we’re going to dive into today.

There are two main components to set a savings goal for your dream home: A down payment & closing costs. Let’s break it down.

Down payment – This is a percentage of the value of the home you’re looking to buy. Most people put down between 5-20%. There are some special programs for first-time homebuyers to put down as little as 3%, so ask your real estate agent about that if you want to put less down.

For example, let’s say your budget is $400,000.     

A down payment of 5% = $20,000. A down payment of 20% = $80,000.

**Quick math refresher on how to figure out a percentage on your calculator**
On your calculator, you take the value of the home and multiply it by .05 for 5%; .1 for 10%; .15 for 15%, or .2 for 20% – is that math making sense?
So $400,000 *.1 is figuring out 10% of $400,000.     

Now onto closing costs. There are two main components to figuring out your closing costs: the transfer tax & a variety of fees.

Transfer tax – This is a tax that is paid when a seller ‘transfers’ a property to a buyer. The tax varies on where you live. Google “transfer tax in [where you live]” and you can find out the transfer tax in your area.

For example, in Philadelphia, the tax is around 4% (I’m rounding here). This tax is split between the buyer and the seller. As the buyer you’re responsible for half, so around 2%.

Using the $400,000 home example again, 2% of $400,000 (or 400,000 * .02 on the calculator) is $8,000 in transfer tax that you’re responsbile for paying.

Fees – there are a variety of fees that you’ll pay in your closing costs. There’s the home inspection, changing the title, loan origination fees, etc. In the Philadelphia area, I’ve seen these fees equal around $5,000. You can get an exact break down of all your fees from the person who helps you with your mortgage.

So let’s say you’re buying that $400,000 home and want to put 5% down. Your total savings goal = down payment ($20,000) + transfer tax ($8,000) + fees ($5,000).

You would set a savings goal of about $32,000.

I also recommend considering things like moving expenses, new furniture, decorative items, and if there are any repairs you may want or need to make upon moving in.

Once you have a savings goal, I’d recommend setting up a new savings account, specifically for the house. From there, you can set up an automatic transfer, from your checking account to your “house fund” savings account. The money will come out of your checking account every month, automatically, just like a bill, and now you’re saving for a house on autopilot!

This is just starting to scratch the surface on the home buying process. If you want to go into more detail and create a plan for yourself, or apply these learnings to your unique situation, or maybe just ask some questions, I’m here for you, girlfriend.  Simply schedule a free 30 minute money chat with me, and let’s talk it through!