Money Expert Rachel Cruze: Here’s How Much You Really Need To Save for a House
Written by
Adam Palasciano
Edited by
Ashleigh Ray
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The age-old American dream of buying your first home has become increasingly more expensive in recent years. Economic uncertainty and market swings spurred by the COVID-19 pandemic have resulted in higher home prices nationwide.
As reported by Redfin, the median sale price for a U.S. home was $438,837 as of July 2024. This represents a 4% year-over-year median price increase. To put this into perspective, the median sale price was just $304,000 in March 2020 at the onset of the pandemic.
In a recent Instagram video, financial expert Rachel Cruze explained how much you should save before buying a home. If you’re still compelled to buy a home instead of continuing to be a renter despite higher costs, Cruze advised factoring in these expenses.
Down Payment
The larger your down payment is, the lower your monthly payment will be and the less interest you’ll owe over the life of the loan. Generally, a 20% downpayment is best to avoid the extra costs associated with private mortgage insurance (PMI).
However, a 5-10% down payment (but no lower) can sometimes be acceptable if you’re a first-time homebuyer. You’ll just have to be prepared for a higher monthly mortgage payment.
Closing Costs
Typically, closing costs include the appraisal, home inspection, title insurance, homeowners insurance, origination fees and taxes. You should anticipate spending roughly 3 to 4% of the home’s price on closing costs.Â
Moving Expenses
Moving expenses can vary significantly based on how far you’re going, how much stuff you’re moving and what region you’re located in. Most often, moving expenses are less than 1% of the home’s price.
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