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Ready to make a down payment? Do these 4 things first

For smart homebuyers, saving up for a down payment is just the beginning. You should also plan for the many costs of purchasing a house, including closing costs, moving expenses, and emergency savings.


Chelsea Levinson, JD

10/18/2022 · 3 min read

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Jena Greene

Key takeaways

  • Buying a home comes with many expenses besides a down payment.

  • Gather your savings as a jumping-off point for financially planning a home purchase. 

  • Then decide your down payment amount based on your savings and financial goals.

  • Plan for other expenses like closing costs, moving expenses, emergency savings, and more.

Buying a house can feel overwhelming, especially since finances are involved. There’s a lot to think about: down payment, closing costs, moving expenses, and all the little home buying costs that may pop up along the way. Once you’ve got your down payment saved up, it might be a challenge knowing what to do next. 

Here are four smart financial steps you should take before you start house hunting.  

1. Calculate your cash on hand

To start, gather up all your savings and investment statements to calculate how much money you have on hand. At this stage, you probably want to look primarily at liquid assets, or those you’re willing to cash out now. Typically, it’s not recommended to cash out retirement accounts or longer term investments when you buy a home, but work with a financial advisor to determine what makes sense for you.

2. Decide your down payment amount

Once you’ve got your savings added up, you’ll know how much cash you’ve got on hand to purchase a home. Now it’s time to think about what size down payment you’ll make. A larger down payment usually comes with a lower mortgage rate. And if you make at least a 20% down payment, you can likely skip paying for mortgage insurance. 

However, you might not need to make a large down payment. Some loans allow for down payments as low as 3%, and a few may allow zero down. Keep in mind that with a lower down payment, you’ll have a higher mortgage rate and you’ll typically have to pay some type of mortgage insurance to cover the lender’s added risk. This will make your monthly mortgage payment more expensive.

3. Prepare for closing costs 

When you buy a home, the down payment isn’t the only cost you have to think about. You’ll probably also need to pay closing costs, which usually add up to around 1-4% of the loan amount. Closing costs are typically paid at closing, so you’ll need to have this money on hand. Plus, you’ll want to earmark some money for moving expenses, new furniture and decor, and any repairs or upgrades you’ll want to make in your new home.

4. Set aside savings 

Another thing to think about is how much you’ll need to put away for emergency savings. Some financial experts recommend you keep 3-6 months of expenses saved. This may seem like a lot, but it’s a good idea to have some cushion when you’re buying a new home. The upfront expenses can really add up, not to mention unexpected costs like surprise repairs the inspection report didn’t catch. 

It’s best to be prepared, and work with a trusted financial advisor every step of the way.  

This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.


Chelsea Levinson, JDAuthor

Chelsea Levinson, JD, is an award-winning content creator with expertise in real estate, mortgage, and personal finance. She has written for top real estate publications like HomeLight and Bigger Pockets, and has created content for some of the world’s most recognizable brands, including Bank of America, Vox, Comcast, AOL, State Farm Insurance, PBS, Delta Air Lines, Huffington Post, H&R Block and more. When she's not writing, you can find her fixing up her cabin in the Catskills.


Jena GreeneEditor

Jena Greene is the Managing Editor at Opendoor. She covers real estate, personal finance, money management, and market best practices. Jena is passionate about empowering people to find their dream homes and making the home-buying process a delightful one.