How Much Cash Should You Have Left After Buying a Home?

When considering a home purchase, many people tend to fixate on one number: the down payment. Once you’ve saved enough cash to reach your goal of 5%, 10%, or 20% down, it can feel like you’ve reached the finish line.

However, there is a number that matters just as much as your down payment: the amount you’ll have left in savings once you get the keys.

Many homebuyers don’t realize how much cash is actually required to buy a new home. Those upfront costs include expenses that can be easy to overlook: closing costs, moving costs, and all the purchases you need to make the house a home. Even more importantly, when you own a home, you’re responsible for any repairs that come up. If the water heater gives up the ghost, the A/C breaks, or you need a new roof, you’re the one who has to pay for it.

With that in mind, putting all your available cash toward the down payment might not actually be the best financial move. Sure, a larger down payment can translate to a lower monthly payment and, depending on your loan, reduce borrowing costs. But keeping an emergency fund available can make the transition to homeownership much less stressful.

So, how much cash should you have left after buying a home? Here we’ll go over the expenses to consider so you can arrive at a number that works for you.

1. Start with the total cash needed to buy the home.

The first step in any home buying journey is to know how much home you can afford. Once you’ve arrived at a target purchase price, you can work backward from there to determine how much cash you’ll actually need to complete the purchase. 

The down payment is just one piece of the puzzle. You’ll also have to cover closing costs, which can include lender fees, inspection fees, appraisal fees, title-related expenses, prepaid homeowners insurance, and other costs associated with taking out a mortgage. You might also have expenses outside of closing, like moving costs.

The Consumer Financial Protection Bureau notes that closing costs typically equal about 2% to 5% of the home purchase price. With that in mind, if you buy a house listed for $350,000, don’t assume that $35,000 in your savings account automatically means you can comfortably afford a 10% down payment. Using that 2% to 5% estimate, you could need another $7,000 to $17,500 to cover closing costs. 

“Homebuyers sometimes become too focused on reaching a certain down payment percentage. But that’s only part of the picture,” says Corey Griffin, Mortgage Loan Originator at Amplify Credit Union. “You want to understand the full amount you’ll need at closing and what your finances will look like the day after you close.” 

2. Determine how much you need in emergency savings.

Once you figure out how much cash you’ll need for the down payment and closing costs, look at how much will be left in your bank account afterward. 

A common benchmark is to have enough to cover three to six months of regular recurring expenses in an emergency fund. However, how much you have in your emergency fund will depend on a variety of factors, such as the stability of your income, whether your household has multiple income streams, and your monthly financial obligations.

An example might be helpful here. Let’s say you buy the $350,000 house and put 20% down and pay 3% of the purchase price in closing costs. That puts your initial cash outlay at $80,500. If, with the new mortgage payment, you have recurring expenses of $5,000 monthly, that means you should have between $15,000 and $30,000 in liquid cash savings. Using this example, you’d want between $95,500 to $110,500 available for the purchase and your emergency reserves.

While many target a 20% down payment, it might not always be the best option. If 20% down would leave you with almost nothing in savings, while a 10% down payment would allow you to retain a reasonable emergency fund, the smaller down payment deserves serious consideration. 

As Griffin notes, “A good down payment is not necessarily the biggest down payment you can possibly make. It’s the one that helps you get a mortgage payment that works for your budget without leaving you financially vulnerable once you own the home.” 

3. Plan for expenses that come after closing.

Having a healthy emergency fund is crucial to building a secure financial future. But when you’re buying a home, it’s not the only cash you want to preserve. There are costs that come with owning a home after closing.

Even if you buy a turnkey home that requires no repairs, you’re still likely to be faced with a few immediate expenses. You might need to pay movers, buy a washer and dryer, replace the locks, buy blinds, and cover utility deposits. 

It’s helpful to divide the money you have after closing into two buckets:

• Emergency savings: This should only be for true emergencies like an unexpected car repair, surprise medical costs, or loss of income.
• Move-in savings: This should be earmarked specifically for home-related purchases.

There’s no standard amount you should put aside for move-in expenses. Instead, make a list of what you know you’ll need to pay for during the first few months. If you expect that paying movers, purchasing necessary furniture and appliances, and covering a few small repairs will cost $5,000 to $10,000 — add that amount to your savings target.

Let’s return to the example of the $350,000 home. So far, we’ve calculated:

$70,000 (20% down) + $10,500 (3% closing costs) + $15,000 (3 months expenses) = $95,500

Adding an additional $5,000 to $10,000 in move-in savings takes the total to between $100,500 and $105,500.

How do you know if you have enough cash left?

Knowing whether you have enough money to buy and own a home is a question that will depend on many factors: your house budget, your monthly income, your monthly expenses, and your comfort level with the unknown. 

Although the specific number of dollars you should have left in your bank account when you get the keys will vary based on your situation, asking the following questions will help you decide if you have enough:

1. After paying the down payment and closing costs, will I still have three to six months in emergency savings?
2. Can I cover moving expenses without incurring high-interest debt?
3. Can I afford to pay for a major repair in the first few months of homeownership?
4. Will my new monthly mortgage payment still allow me to rebuild savings?

If your answers to these questions make you uncomfortable, you might benefit from adjusting your down payment amount, considering a less expensive home, waiting a while longer to buy, or exploring loan and down payment assistance options. The key takeaway is that you don’t need to have enough cash simply to purchase the home. You need to have enough money in reserve so that you can afford to own your home and enjoy it.