The Problem with Saving for a Down Payment That Nobody Talks About

After many months (or, more likely, years), you finally feel like you have enough money stashed away to buy a house within your budget. And while you may have reached your down payment goal amount, based on online mortgage calculators or conversations with a lender, it’s a good idea to keep saving.

Saving up just enough to cover the down payment, then forking over every single penny at closing, can make your life harder when you’re buying a home, according to real estate agents and lenders. Though saving up for a down payment is a crucial step in buying a house, it’s also important to have a little cushion beyond that amount.

If you can, you should either save more than your target down payment figure or hold some of your down payment savings back for unexpected emergencies, repairs, immediate and necessary renovations, and other expenses.

“I always advocate for my buyers to have extra funds,” says Sarah Medina, a real estate agent in Michigan. “It’s important to me that they don’t end up house poor or stressed out because they’re short on money.”

If you already have a separate “rainy day” fund saved up for general emergencies, putting all of your house savings toward a down payment may be less risky. But home expenses, whether planned or unplanned, aren’t cheap. In an ideal world, you’d keep your rainy day cash intact in case you lose your job or your car breaks down, then have a separate house fund for any surprises you find after you move in. 

“It’s not unheard of that a buyer moves in and within the first week the furnace dies, the washer breaks down, or a pipe becomes overloaded and bursts,” Medina says. “You’re a homeowner now and those expenses are on you.”

Random calamities aside, you may also need to spend money to immediately remedy some issues that arose during the home inspection. (In this hot seller’s market, you may not be able to negotiate with the seller to cover these costs or make the repairs before you move in.)

It’s also helpful to have some money set aside for other seemingly small homebuying and moving costs that really add up over time — things like hiring movers or renting a moving truck, getting a lawnmower to cut the grass, buying gallons of paint for the walls, replacing an inefficient washing machine, or purchasing new furniture to fit awkward spaces. 

Though saving even more money or holding back some of your down payment can seem overwhelming, the good news is that you don’t need to put down 20 percent to buy a house like you may have been led to believe — you can put down 15 percent, 10 percent, or even get down into the single digits with some special financing programs.

“You don’t need as much down as you think,” says Nicole Rueth, a Denver-based lender and branch manager at Fairway Independent Mortgage Corporation. “There are down payment assistance programs with as little as $1,000 or 1 percent down.”

This piece is part of Money Month, where we’re covering everything from side hustles to down payments to a beginner’s guide to investing. Head over here to read more!