How much money should you have saved before buying a house in Houston? Saving enough money before purchasing a home is crucial to ensure a smooth buying process and to avoid financial strain. But how much should you really have saved before you start house hunting? The answer depends on several factors, including the down payment, closing costs, and other expenses. 

In this blog post, Houston realtor Chris Schmidt and the professionals at Your Home Sold Guaranteed Realty - Chris Schmidt Team will discuss how much money you should have saved before buying a house.

Key Takeaways:

• The down payment is one of the largest upfront costs when purchasing a home. For many buyers, this is where the bulk of their savings will go. The amount you need to save for a down payment depends on the price of the home, the type of loan you’re getting, and lender requirements.
• Closing costs are the second main expense buyers need to prepare for. These costs typically range from 2% to 5% of the mortgage loan amount and include fees for appraisals, inspections, title insurance, and more.
• Combining all home-buying expenses, you should aim to have at least $50,000 to $75,000 saved before buying a home in Houston.

How Much Money Should You Have Saved Before Buying a House?

Understanding the Down Payment

The down payment is one of the largest upfront costs when purchasing a home. For many buyers, this is where the bulk of their savings will go. The amount you need to save for a down payment depends on the price of the home, the type of loan you’re getting, and lender requirements.

There’s usually no set down payment amount. Instead, you can choose to pay between 3.5% to 20% or more. However, it’s important to note that the more you pay, the better your loan terms will be. In Houston, where the average home price is around $349,000, here’s what you can expect to pay for various down payment amounts:

• 3.5% Down Payment: This is the minimum required for an FHA loan, which is popular among first-time buyers. For a $349,000 home, this would be about $12,215.
• 10% to 15% Down Payment: This is the average down payment amount. For a $349,000 home, this would fall between $34,900 and $52,350.
• 20% Down Payment: Paying this much will help you avoid private mortgage insurance (PMI) and secure better loan terms. For a $349,000 home, this would be $69,800.

Chris Schmidt notes:

“While a 20% down payment is ideal, many buyers in Houston find it challenging to save that amount. FHA loans are a great alternative, especially for first-time buyers, as they require less upfront cash.”

Calculating Closing Costs

Closing costs are the second main expense buyers need to prepare for. These costs typically range from 2% to 5% of the mortgage loan amount and include fees for appraisals, inspections, title insurance, and more. For a $349,000 home in Houston, you could expect to pay anywhere between $6,980 and $17,450.

It’s crucial not to overlook closing costs when budgeting for a home purchase. Many buyers focus solely on the down payment, but closing costs can add up quickly and catch you off guard if you’re not prepared.

Building an Emergency Fund

An emergency fund is an essential component of your savings plan when buying a home. Homeownership comes with unexpected costs, from repairs to fluctuations in property taxes. A solid emergency fund ensures you’re not caught off guard by these expenses.

Ideally, your fund should cover 3 to 6 months of living expenses, providing a financial cushion in case of unexpected events such as job loss, medical emergencies, or major home repairs. The exact amount you save will depend on your personal living expenses and mortgage, but could fall between $7,500 to $15,000.

Additional Costs to Consider

Beyond the down payment, closing costs, and emergency fund, there are several other expenses you should account for when buying a home in Houston:

• Moving Costs: Budget for moving expenses, which can vary depending on the distance and amount of belongings you’re transporting.
• Initial Home Repairs or Upgrades: Even in a new home, you may need to make some repairs or improvements to the property.
• Furniture and Appliances: If you’re moving into your first home, you’ll likely need to purchase furniture and appliances.

Schmidt advises:

“It’s always a good idea to have extra savings set aside for the initial costs of setting up your new home. You don’t want to drain your entire savings on the purchase and then struggle to furnish your new space.”

Combining all these expenses, you should aim to have at least $50,000 to $75,000 saved before you start the home-buying process in Houston. This amount should cover a modest down payment and closing costs, as well as provide a buffer for unexpected expenses.

However, the exact amount you’ll need will depend on the specific home price, your financial situation, and your long-term goals. For this reason, it’s crucial to talk with an experienced realtor or financial advisor who can help you navigate the complexities of the Houston housing market and ensure you’re financially prepared for homeownership.

Call or Text Chris Schmidt Today to Get Your Mortgage Loan Process Started!

Chris Schmidt is the owner of Your Home Sold Guaranteed Realty – Chris Schmidt Team. Chris has 20+ years of experience in real estate and is deeply familiar with the Houston housing market. He’s a member of the Houston Association of Realtors and has earned the Graduate, Realtor Institute designation from the National Association of Realtors.

He began his real estate career in 2004, when he joined Coldwell Banker United as a broker associate. He worked as a broker associate for over 10 years before deciding to begin his own real estate and mortgage lending team.

If you work with Chris Schmidt and the agents at Your Home Sold Guaranteed Realty – Chris Schmidt Team, you’ll have nothing to worry about on your home purchase or sale of your home. We’ve received numerous 5-star reviews from past clients who loved working with us. Clients value working with our team because we always take the time to understand their real estate goals and learn about what’s most important to them.

Faster

• Get pre-approved in minutes
• Closings on average in 20 days or less

Cheaper

• 1% and 3% down options
• Borrower Assistance Programs
• Savings that average over $9,400 versus large banks and retail lenders

Easier

• User-friendly technology allows you to track the status of your loan throughout the process

To Discuss Your Home Sale or Purchase, Call or Text Today and Start Packing!