It’s tempting to skip the money question and jump straight into looking at homes in your area. After all, home shopping is way more fun than thinking through your finances!  But a weak financial foundation is a recipe for regret when it comes to your home purchase.

Don’t shortchange your future by having a short-term perspective. You'll build years of memories in your home. You’ll share countless meals in the kitchen and spend hours enjoying warm summer days in the backyard. Do you want those moments overshadowed by financial stress?

Buying a home is probably the biggest purchase you’ll ever make. Are you sure you’re ready? Answering these two questions will help you know!

Are you financially ready to buy a house?

Before you begin the home-buying process, we recommend paying off debt and saving up three to six months of expenses in an emergency fund. Being financially ready to buy a house is important. Why?

When you no longer have a landlord, the responsibility of paying for repairs falls on you. So what happens if your water heater bursts after just three months in your new home?

When you don’t have room in your budget and no savings to fall back on, you may be eating ramen for the rest of the month to get that fixed. But if you have a full emergency fund and no debt taking up real estate in your monthly budget, an unexpected repair won't rock your whole life.

How much should you save?

Just like any goal, buying a home the smart way takes planning and preparation. The most time-consuming task is saving cash for the down payment, closing costs and other moving expenses.

• Down payment: There are programs, such as those backed by the Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA), which offer loans with no down payment to qualified buyers. Mortgages underwritten to Federal Housing Administration (FHA) guidelines offer down payments as low as 3.5% — and even today’s conventional loans can go as low as 3% down.  Many financial advisors recommend putting down at least 10% on your new home, but 20% is even better because you avoid private mortgage insurance (PMI). That's an extra cost added to your monthly mortgage payment, and it doesn’t go toward paying off your mortgage balance.
• Closing costs and prepaids: Many real estate agents advise clients to save around 3% of a home’s purchase price for closing costs and prepaids. But that percentage can vary depending on how expensive fees and taxes are in your area. Closing costs are the fees charged by title companies and lenders involved in your real estate transaction. Prepaids cover any prorated property taxes and insurance items.
• Moving and other expenses: Moving expenses can vary from hundreds to thousands of dollars depending on how much you’re moving and how far away your new home is from your current place. To help with budgeting, you can call moving companies in your area for quotes ahead of time. If you plan to make updates to your home—like repainting, installing blinds, or buying new furniture—you’ll need cash for that too!
  
  

Ready to get your savings rolling? You’ve got this! Saving for a down payment isn’t rocket science. Set a plan and focus on your milestones and you’ll have that down payment before you know it.  Think you are ready to see what you may qualify for?