FAQ
How much should first-time buyers save before shopping?
Quick Answer
Beyond your down payment, plan to have cash available for closing costs (typically 2%–4% of the purchase price), a general moving and setup fund, and ideally a reserve for unexpected repairs after moving in. Exact figures depend on your loan program, purchase price, and personal circumstances, so it's worth running real numbers with a lender before you start touring homes rather than relying on a generic savings target.
Key Takeaways
- Down payment and closing costs are separate cash requirements — budgeting for one without the other is a common first-timer mistake.
- Closing costs in Minnesota typically run 2%–4% of the purchase price, on top of the down payment.
- A moving and initial setup fund (movers, utility deposits, basic supplies) is easy to forget when budgeting for a home purchase.
- A repair reserve for the first year of ownership is worth having even after a clean inspection — homes always turn up small surprises.
- Getting pre-approved gives you a real, lender-verified number rather than a rough personal estimate.
This is one of the most common questions first-time buyers ask, and the honest answer is that it depends on more than just the down payment most people focus on.
The Down Payment Is Only One Piece
Down payment requirements vary by loan type — as low as 3% on some conventional loans, potentially 0% on eligible VA or USDA loans, and typically 3.5% minimum on FHA loans. But treating your down payment as the whole savings target is the single most common miscalculation first-time buyers make.
Down payment and closing costs are separate numbers
These always show up as distinct line items on your closing paperwork. A 5% down payment on a $425,000 home is $21,250 — closing costs are calculated on top of that, not included in it.
What Else to Actually Budget For
Cash needs beyond the down payment
- Closing costs — typically 2%–4% of the purchase price in Minnesota
- A moving and setup fund — movers, initial utility deposits, basic supplies for the new home
- A repair reserve — even inspected homes can turn up a surprise cost in the first year
- The first month or two of the new mortgage payment, in case of any timing overlap with a current lease
Dave's Local Insight
I encourage buyers to think of this as four separate buckets, not one big number — it makes the whole thing feel more manageable and makes it easier to see where you might be short.
A Rough Way to Estimate Your Total Cash Need
0%–20%+ depending on loan type
Down Payment
2%–4% of purchase price
Closing Costs
Varies — plan a few thousand dollars
Moving/Setup Fund
Recommended, even after inspection
Repair Reserve
These ranges are wide because they depend heavily on your loan program, purchase price, and personal circumstances. The only way to get an actual number is to run your specific situation with a lender.
Why Getting Pre-Approved Solves This Better Than Guessing
| Approach | Result |
|---|---|
| Estimating your own budget informally | Risk of underestimating total cash needed, especially closing costs |
| Getting pre-approved before shopping | A lender-verified number based on your actual credit, income, and loan program |
Bottom Line
First-time buyers should plan for four separate cash needs — down payment, closing costs, a moving/setup fund, and a repair reserve — rather than treating the down payment as the whole target. Getting pre-approved early replaces guesswork with an actual, lender-verified number specific to your situation.
Related Questions
Sources
Written by Dave Brown
REALTOR®, LPT Realty
Dave Brown is a REALTOR® with LPT Realty who has spent his career helping families buy, sell, and settle into life in Woodbury, Minnesota and the surrounding East Metro. He writes Woodbury Living as a local resource first and a business second — every guide is meant to leave you better informed, whether or not you ever work together.
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