Saving For Homeownership

For many Americans, homeownership is still a top-of-mind goal. After the historic housing boom we saw created by the pandemic, many potential buyers finally took the leap to homeownership. However, for some, they were priced out and forced to continue living where they are at. For some of these buyers, they might be worried about saving for homeownership. Many buyers were discouraged and decided to wait until the market cooled to buy their home. However, this might have changed how much they need to be saving for homeownership. It is important to remember the three main processes that you will need to save for when trying to achieve homeownership. Here they are.

Down Payment

We have talked about the importance of saving for a down payment a few times on our blogs. It is also important to remember that, while it may seem intimidating to save up such a large amount of money, there are options that allow you to put less down. For example, and FHA loan will only require 3.5% down, and a VA or USDA loan requires no down payment. However, this does not take away from the top-of-mind awareness about saving for homeownership. While every situation is different, one myth we are trying to put an end to is the myth of needing 20% down to purchase a home. As a matter of fact, there are less people putting 20% down that are. As a recent article from Mortgage Reports explains,

“The idea that you have to put 20% down on a house is a myth. . . . The right amount depends on your current savings and your home buying goals.”

To truly understand your options when saving for a down payment, it is smart to get with a professional real estate agent. These agents are professionals and know about the various loan types available to you. Not only can they explain different loan types, but they also know about down payment assistance programs and what those might require.

Down Payments | What Down Payment Is Right For You? | Premier Homes Team

The Average Down Payment Is Much Lower Than 20%

Saving For Homeownership: Closing Costs

A very forgotten part of saving for homeownership is closing costs. Typically, closing costs are around another 2 to 5% of the closing price. These costs are a collection of fees and payments made to those who help facilitate the transactions involved in real estate. Bankrate explains:

Closing costs are the fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.”

A great way to understand what these costs actually include is to work with a qualified and trusted lender. These lenders will go into vast detail about every dollar you will be spending when closing your transaction. It is important to remember the full scope of saving for homeownership, and closing costs are often overlooked. Do not forget to save for closing costs!

Earnest Money Deposit

Finally, we have your final process to remember to saving for when saving for homeownership. This is the earnest money deposit. While this is actually the first real expense that you will likely have to pay out, it is repayable at the closing table and can be used towards your down payment. An earnest money deposit is a check usually that shows good faith of wanting to proceed with the transaction. Most offers include some type of EMD, whether it is $500 or $5000 and anything in between. According to, usually good faith deposits are about 1-2% of the total home price.

This deposit is like a credit towards buying your home. It is not an added expense – which is important to remember. This deposit is paying a portion of your upfront costs. While showing you are a serious buyer, the EMD also allows you to put up some of your costs at first and have this benefit you towards closing. According to,

It tells the real estate seller you’re in earnest as a buyer, . . . . Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront.”

Keep in mind, however, that an EMD is not required. However, it is almost a guarantee that buyers put this down in the current real estate market. For anymore help with what to save, feel free to reach out to Premier Homes Team in Louisville, Kentucky, and any of our real estate agents are willing to help.