How Much Should I Save for a Down Payment and Closing Costs?

One of the biggest myths about buying a home: you need 20% down. You don’t. Here’s what you actually need to save.

Down Payment: 3–5% is Fine

Conventional loan: 3–5% minimum (20% avoids PMI, but doesn’t require it) FHA loan: 3.5% minimum VA loan: 0% (if you qualify)

For a $300,000 home:

• 3% down = $9,000
• 5% down = $15,000
• 20% down = $60,000

Waiting 5 years to save $60,000 means missing out on 5 years of appreciation and building equity. Most first-timers buy with 3–5% down.

Closing Costs: Budget an Extra 2–5%

Closing costs in Florida run 2–5% of the loan amount. For a $300,000 home with a $285,000 loan:

• 2% = $5,700
• 5% = $14,250

Common closing costs:

• Loan origination: $2,850 (1% of loan)
• Appraisal: $600
• Title insurance: $1,500
• Doc stamps: ~$1,000
• Homeowner’s insurance (prepaid): $1,200–$2,000
• Closing attorney: $500–$1,000
• Survey/inspection: varies

Total Savings Target

Realistic first-time buyer budget:

• Down payment: 5% of home price
• Closing costs: 3% of loan amount
• Total upfront: ~8% of home price

For a $300,000 home:

• Down payment: $15,000
• Closing costs: ~$8,550
• Total needed: ~$23,550

Ways to Reduce Your Savings Goal

1. Lower down payment: 3% instead of 5% saves $6,000 2. Seller concessions: Ask seller to cover closing costs (common in buyer’s markets) 3. Lender credits: Some lenders will cover closing costs in exchange for a higher rate 4. First-time buyer programs: FHA, state programs may reduce costs 5. Gift funds: Family can gift down payment (no repayment expected)

PMI: The Cost of Putting Down Less Than 20%

If you put down less than 20%, you’ll pay PMI (private mortgage insurance). Typical costs:

FHA loan (3.5% down): 0.5–1.0% annually (built into payment) Conventional loan (5% down): 0.3–0.6% annually

On a $285,000 loan, that’s $850–$1,700 per year or $70–$140 per month.

Good news: Once you reach 20% equity, you can request PMI removal. If your home appreciates, this could happen in 3–5 years instead of the full 30-year mortgage.

The Real Question: To Wait or Buy Now?

Buy now if:

• You have 3–5% saved
• Home prices are stable or declining
• Interest rates are reasonable
• You plan to stay 5+ years

Wait if:

• You have less than 3% saved
• Your credit score is below 620
• You’re uncertain about staying long-term
• Interest rates are dropping

Remember: waiting to save 20% means paying rent for years. Building equity (even with PMI) often beats waiting.

Use our affordability calculator to see your real number.