How Much Money Should I Save Before Buying a House

Do you dream of owning a house someday? If so, you may be wondering how much money you'll need to save before buying one. The total amount, of course, varies greatly from person to person.

There are several ways to purchase a house, but most people either pay the total amount in cash or take out a home loan.

According to Rocket Mortgage, the average American puts approximately 6% forward as a down payment, far from the preferred 20%. That's only $6,000 for a $100,000 mortgage.

The Average Down Payment On A House In America

Don't Forget These Additional Costs When Saving To Buy A Home

There are many costs associated with home buying. Here are some of the extra costs that may sneak up on you and sideline your monthly budget.

Private Mortgage Insurance

You'll need to check with your lender to see what options they offer, but you'll likely pay for this unless you can afford to put 20% down in cash. If you borrow more than 80%, you will pay PMI until you build up 20% equity and can refinance.

Closing Costs

These fees cover the cost of the closing paperwork for the property. They also include legal fees, title searches, surveys, etc. These closing costs vary by state, so it's best to talk to your real estate agent.

Initial Down Payment

The initial money you put toward the purchase. This amount varies depending on the loan type and interest rate. A larger down payment usually results in lower monthly payments.

Homeowners Insurance Premiums

Some loans require mortgage insurance premiums. These may be paid once per month and protect the lender and owner from damage to the property.