First Home

The first home purchase is the largest financial transaction most people have made when they make it — and it arrives with a category of costs that’s systematically underestimated in first-time buyer planning. The down payment gets all the attention in saving discussions, but the closing costs, inspection fees, moving costs, immediate repair and furnishing needs, and first-year ownership surprises collectively add 3–8% of the purchase price in additional cash requirements beyond the down payment. Planning for the full cash need is the first preparation step that matters most.

Down payment requirements vary by loan type. Conventional loans require 5–20% down; putting less than 20% triggers private mortgage insurance (PMI), typically 0.5–1.5% of the loan amount annually, which adds $3,000–$9,000 per year on a $600,000 mortgage until the loan reaches 80% loan-to-value. FHA loans require 3.5% down but carry permanent mortgage insurance premiums for most borrowers. VA loans (for qualifying veterans) and USDA loans (for qualifying rural properties) allow 0% down with their own fee structures. For first-time buyers in high-cost markets, 10% down on a $900,000 home represents $90,000 in down payment — a significant accumulation challenge even for high-income households early in their careers.

Closing costs on a purchase typically run 2–5% of the loan amount. For a $800,000 home with $160,000 down and a $640,000 mortgage, closing costs of 3% represent $19,200 — paid at closing in addition to the down payment. Line items include lender origination fees, title insurance (both lender’s and owner’s policies), escrow fees, attorney fees in states that require them, appraisal, home inspection ($400–$1,200 for a quality inspector on a typical home), and prepaid items including homeowner’s insurance and property tax escrow.

The decision framework for whether buying is the right move at all — particularly in high-cost markets — lives in buy vs. rent. For the ongoing ownership costs that follow closing, see HOA & upkeep and property tax. The Life & Money pillar covers the first home purchase as part of the broader financial picture of major life events.