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As a first-time homebuyer, you may be wondering, what exactly is a down payment? This is the cash deposit you pay toward a home's purchase price, and it's usually the biggest up-front cost when you buy. You may be able to put as little as 3% down, though most buyers put down more. You could also receive money toward your down payment through a down payment assistance program. Keep in mind that the assessed value is not the same as the price you paid for your home. If home values go up in your area, your city or county could assess your home at a higher value, meaning you’ll pay more in property taxes.
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That fee pays for shared amenities, such as landscaping or pools, or maintenance and repairs to the building or shared community spaces. Property taxes are paid to your local government for community amenities and services, like public schools, roads and fire departments. Counties calculate property taxes based on a percentage of a home’s assessed value.
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You can usually keep your costs lower if you bundle homeowners with your auto or life insurance policies. Based on the estimates above, let’s look at what upfront costs you might have on a $350,000 house. Our partners cannot pay us to guarantee favorable reviews of their products or services. Adrian Nesta is a Senior Data Reporter on the Data Journalism team at Dotdash, the digital publisher that owns and operates The Balance. His work includes data collection, cleaning, analysis, and visualization for stories in the data journalism portfolio across every vertical at Dotdash. Regional costs were down overall, too, even in the most expensive areas The Balance examined.
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What is a down payment?
Choose from 30-year fixed, 15-year fixed, and 5-year ARM loan scenarios in the calculator to see examples of how different loan terms mean different monthly payments. Get pre-qualified by a lender to see an even more accurate estimate of your monthly mortgage payment. Like taxes, these two types of insurance vary by state and region and can also be paid by your lender from an escrow account. According to NerdWallet's analysis, the average cost of homeowners insurance is $1,784 a year. The cost of hazard insurance, which is generally part of homeowners insurance policies, is determined by the risk factors in your area, such as floods and earthquakes.
We’ve included a national average in the data as a baseline, but these costs often depend on the city and region. For example, Baltimore, Maryland and Phoenix are just $74 apart in the first month’s costs—not that different—but Baltimore residents pay $9,119 more in closing costs, on average. To make sure a homebuyer isn’t completely wiping out their bank account, lenders may require them to show that they’ve got additional cash at their disposal. This acts as a form of guarantee that the borrower will be able to make mortgage payments. Typically a borrower is required to have at least two months’ worth of mortgage payments in reserve.
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The average American homeowner spends about $270 a month on home utilities. You may have paid some utility bills as a renter, and your landlord covered the rest. As a homeowner, you cover 100% of the cost of heating, cooling and lighting your home. A 20% or larger down payment isn’t a requirement to buy a home, but it can help and unlock more mortgage options.
You’ll want to save money, improve or maintain your credit score and compare lenders to get the best mortgage rates possible. Before you get started, find a local real estate agent to guide you through the homebuying process — interview several candidates to find someone who you trust and can work well with. If you’re buying a condo or another kind of home in a community overseen by a homeowners association (HOA), you’ll likely be required to pay a monthly fee. These funds go toward the services the association provides, which may include security, a pool or gym and landscaping and maintenance.
The down payment always looms large for folks considering buying a home. Though a 20% down payment would enable you to skip mortgage insurance — more on that below — putting 20% down isn't required. In 2021, the average down payment was 7% for first-time buyers and 17% for repeat buyers, reports the National Association of Realtors. Starting an emergency fund before buying a home is a smart money move.
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Let’s say your policy protects your home against fallen trees or branches. If a tree falls on your house, the insurance company will help pay to repair any damage. Homeowners insurance is another cost of homeownership you’ll need to consider. A fixed rate is when your interest rate remains the same for your entire loan term. An adjustable rate stays the same for a predetermined length of time and then resets to a new interest rate on scheduled intervals.
In pricey urban areas, HOA fees can rival mortgage payments, so pay close attention to those costs before buying. You should also consider whether the complex is due for a major upgrade, which could lead to a special assessment — an additional bill to cover each homeowner's share of the joint improvement. The seller typically pays for a few, such as the commission for the real estate agent and often, a real estate transfer tax. The average upfront cost to buy a new home in the U.S. is $40,559. This cost includes the down payment, closing costs, and the first monthly payment.
Explore mortgage options to fit your purchasing scenario and save money. If you've purchased a condo or home that belongs to a homeowner’s association (HOA), you'll need to budget for HOA dues in your household expenses. These monthly fees are generally used for property maintenance in some neighborhoods and condo properties. HOA dues can range from $100 to over $1,000 depending on the property and location. Most mortgage lenders will require you to take out a homeowners insurance policy, which protects you against damage from unexpected events such as natural disasters, theft or vandalism. The cost significantly varies, especially in areas at high risk of hurricanes, tornadoes and the like, and there are many options, so it’s smart to compare offers to keep the expense as low as possible.
Given all this fluctuation, it’s reasonable to wonder whether you should buy a home now or wait. Making that decision will depend on your finances, credit and long-term goals — and also on the prevailing mortgage rates, which currently remain high and reduce your purchasing power. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. You’ll also pay more if you have more stuff to haul or are using additional services such as packing or unpacking, assembling furniture or moving oversized items (like a piano or swingset).
The fees cover an association’s cost of maintaining shared common areas. The fees can cost anywhere from a few hundred dollars a year to thousands of dollars a month. On average, the owner of a single-family home pays $200 – $300 a month in HOA fees. The closing costs you pay will depend on where you live, your loan’s size and the type of loan you take out. Expect to pay around 2% – 6% of your total loan amount in closing costs. So, if you take out a $200,000 mortgage, you’ll likely pay between $4,000 and $12,000 in closing costs.
Most first-time home buyers will find down payment assistance options that cater exclusively to them. However, not all lenders accept all down payment assistance programs. If you want to use down payment assistance with a Rocket Mortgage loan, contact a Home Loan Expert to confirm that the program is compatible.
According to the 2021 American Community Survey, the national median mortgage payment is $1,672. However, this varies widely based on the price of your house and the cost of living in your area. Unless you’re paying cash, you won’t pay for your new house all at once. However, you’ll need some cash on hand when you close on the sale. Exactly how much is relative to the total purchase price of your home. Our index relies on regional data for both the cost of housing and income.
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