How to Budget for a New Home

Preparing to purchase a home can be an exciting process, but that’s not to say it doesn’t come without stress. Arguably the most dreadful part of the home buying process is, you guessed it – the financials.

To complicate things further, loved ones and the internet may offer a million different pieces of advice, sometimes even contradicting one another! With all of this excess information, it’s easy to see why the home buying process can be overwhelming. But don’t worry, we’ve rounded up the basics for you so you can get back to what matters – saving for your dream home!

What Do You Need to Save For?

Before diving into ways to save, let’s first consider what you need to save for beyond the standard mortgage and down payment. If you don’t know what to save for, you won’t know how much to save!

Down Payment

The first thing you will typically start saving is your down payment. The amount you put down for a down payment will pave the way for your loan amount and future mortgage payments. If this is your first time purchasing a home, you may qualify for an FHA loan which means only a 3% down payment is required. That equals out to roughly $10,000 for a $300,000 home! With that being said, the more you put down, the lower your mortgage payments will be in the future.


The next significant cost when it comes to home purchasing is your monthly payments or mortgage. While you don’t necessarily need to save up for these ahead of your move, it’s a good idea to have a safety net before living in the home. Should anything go wrong, you will have months of mortgage payments prepared and major peace of mind!

Your monthly payments will vary depending on the down payment you put down and the overall cost of the home. Typically your house payments should only be a third of your gross annual income. So, for the $300,000 home mentioned in the last section with a $10,000 down payment and 3% interest rate, you can expect a monthly mortgage of roughly $1,600. Having six months or more of these payments saved up is ideal. That equates to at least 9,600, give or take.


If you plan to live (i.e., sleep, breathe, eat) in your new home, you’ll have utilities. Utilities include electricity, air conditioning, sewer, garbage, and more. Usually paid monthly, though sometimes quarterly or as needed, your utility cost can vary greatly. The more occupants and use, the more your utilities will cost. Because you’re unfamiliar with the costs of your utilities in the new home, it’s best to have a slight safety net while you gauge the standard price.

Emergency Funds

It’s all too easy to skip budgeting for an emergency fund, thinking you will get to it someday. However, the last thing you want is an emergency to happen when you don’t have the costs to cover it. Especially true if you’re purchasing an older home, you’ll want to budget for an emergency fund PRIOR to moving in.

Imagine you’re still settling into the new home and run the dishwasher for the first time when a pipe suddenly bursts. Now you have a flooded kitchen, and the repairman estimates $1,000 or more for the repair. Yikes! Having an established emergency fund to pull from for surprise problems is vital. In that same notion, don’t skimp on homeowner’s insurance! Sometimes, no amount of saving can prepare for when a catastrophe strikes.


Ever so popular these days, you may be thinking of purchasing a fixer-upper. If that’s the case, you will need a healthy budget to cover remodeling costs. You may be able to qualify for a loan that covers some of those renovations, but it’s best to have that safety net in case something goes wrong, such as uncovering a significant issue that you weren’t aware of. Think dry rot, faulty wiring, etc.   

How to Save

Now that we’ve run through the reasons you might need to save, let’s get into HOW to save. From the obvious to things you may not have considered, we’ve rounded up the best for you! 


The easiest way to prepare for a new home is to budget and funneling more money into that dream home fund. There are many different methods for budging out there, from the envelope system to hiding your credit card and eating ramen for months on end, but the best process is the one that works for you and your family. To prevent unnecessary stress while preparing to buy a home, focusing on striking a balance between being conservative and still living an enjoyable life.


Another option to save money for a move is to downsize your life. Downsizing can mean moving into a studio or your parent’s house while you save the excess money to put toward a down payment. It could also mean selling furniture, clothes, tools, and other items you no longer need while bringing in extra money.

And bonus: you’re actively eliminating things you’ll have to pack that you don’t even need!

Minimize extracurriculars

While we mentioned above that you are still worthy of a quality life as you save for your future home, it may be worthwhile to cut down on extracurriculars where possible. Small changes will make a major difference over time. Limit unnecessary purchases like cocktails at dinner, take-out, and clothes so that you might funnel that money into your down payment or emergency fund.

Side Hustle

Everyone’s favorite way to acquire extra money these days, a side hustle! Picking up a side hustle is one of the easiest ways to bring in cash if you cannot make spending changes in your day-to-day life. There are so many great options out there these days ranging in requirements. From extensive skills in the gig economy to ones that require none, there is something for everyone.

Lower Your DTI

Lowering your debt-to-income ratio isn’t necessarily a budgeting technique, but it will make a world of difference in the homebuying process. If you didn’t know, your DTI is the amount of debt you carry compared to how much you earn every year. Any money towards auto loans, school loans, or judgments against you contribute to your DTI.

With that being said, your DTI has a massive impact on your credit score. This number can impact how big of a mortgage loan you can qualify for, which affects your purchasing power while home shopping. Also, the number could affect a future credit line amount should you need remodels or have an emergency.

Final Thoughts

There you have it! We’ve provided an outline for the major home purchasing expenses you will need to save for and a roadmap of ways to do so. If purchasing a home is your ultimate goal, it doesn’t have to be as scary as people make it seem. With a bit of knowledge and willpower, you’re one step closer to the comfort and safety of your own space and building generational wealth!


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