Badass vs Dumbass
Master your Financial Kung Fu to be one and not the other.
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👉 Go to Sifu’s Notebook for How Much Money You REALLY Need to Buy a Home
Primer: Who are Sifu & Ronin
Episode 42: Ronin’s Ready To Move!
Ronin: Big day, Sifu! With my last paycheck, I officially have enough to put a down payment on that sweet condo I’ve been eyeballing! Home ownership, here I come. Yeah baby!
Sifu: Well, I guess congratulations are in order. Or are they, #1?
Ronin: Sure boss, why not? I mean it’s time, right? I’m sick and tired of paying someone else’s mortgage with my rent money. That bastard slumlord is laughing all the way to the bank!
Sifu: Hmmm. So you think you have enough to buy the condo now, eh?
1. Down Payment: The Gateway
Ronin: Yes sir! I’ve got just enough for the down payment as of this week. Should be good to go, right? Don’t say it! I need more??
Sifu: Oh boy. You do have much to learn, #1. Having the down payment is massive for you and congrats are def in order, for that. But and it’s a BIG but. Your down payment is just your entry fee to the game. The true battle begins once you’ve crossed that threshold.
Ronin: Dang! Are you serious, bro? Thought I was at the finish line. How many more laps do I have to do?
2. Closing Costs: The Sneaky Extras
Sifu: Well, let’s start with closing costs. Just a modest 2 to 5 percent of your home’s price. For a $500,000 home, that’s another $10,000 to $25,000. Do you have this extra amount buried somewhere under your bed?
Ronin: Wait, what!? 25 stacks – that’s a truckload of green, boss! Is this real estate or are we paying for a wedding? Do I at least get to smash cake into someone’s face at the end?
3. Moving Costs: All Your Stuff Doesn’t Move Itself
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Sifu: Once you’ve survived the closing, it’s time to move. And no, your friends won’t do it for free pizza anymore. I’ve seen how much junk you have in your place.
Ronin: Tell me about it. My friends would rather drop a kettlebell on their foot than help me lift a couch. So how much to hire professionals to do the heavy lifting?
Sifu: Depending on the distance, you’re looking at $1,000 to $2,000.
Ronin: Sheeeeit! For that price, I better get a DJ as part of the crew to keep this party going!
4. Home Insurance: Because Sh!t Happens
Sifu: Then there’s homeowners insurance, because the universe loves throwing curveballs at you, like broken water heaters and freak hailstorms.
Ronin: Oh, good. I’ll just add that to my collection of “things I pay for but hope I never use.” How much are we talking about, bossman?
Sifu: Around $1,200 annually, depending on your location and whether your home is in an area known for floods, earthquakes, or spontaneous combustion.
Ronin: $1,200 to protect my home from spontaneous combustion? Deal me in!
5. Property Taxes: A Never-Ending Drain
Sifu: Ah, but it doesn’t stop there. You must also account for property taxes.
Ronin: What!? More taxes? I pay plenty of income taxes and sales taxes all the time. Isn’t that enough? What am I, a punching bag for the government?
Sifu: Typically, it’ll run you 1.5% of your home’s value annually. On a $500,000 home, that’s $7,500 a year.
Ronin: Perfecto. Paying all this tax is starting to feel like a side job. Nothing like a yearly reminder that your home is never truly yours.
6. Utilities and Ongoing Costs: Welcome to Adulthood
Sifu: And let’s not forget utilities. Owning a home means paying for heat, electricity, water, gas, and internet.Expectto pay between $200 and $500 per month for basic utilities. Larger homes or older systems can push that even higher.
Ronin: Awesome. I always wanted to spend my hard-earned money on things like “light” and “not freezing to death.”
7. Maintenance and Repairs: Homes Need TLC and Sh!t Breaks!
Sifu: And, of course, you’ll need to maintain your new home. Set aside 1% to 3% of the home’s value each year for repairs: roof repairs, heating system maintenance, and inevitable plumbing nightmares. Hey, in your rental, aren’t these are covered by your landlord?
Ronin: Wait, whaaaat? Somehow, I’m starting to like my landlord now.
Sifu: Ha! You hate on that dude all the time.
Ronin: Sheesh, so my rent isn’t all profit to the dude, is it?
Sifu: e-Nope!
8. Furnishing & Appliances: Because a Sleeping Bag Doesn’t Cut it.
Sifu: And lastly, once you have your home, you’ll need to fill it. Furniture, appliances—these are all part of the hidden costs.
Ronin: Ah, yes, looking forward to spending $2,000 on a couch that my cat will promptly destroy.
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Sifu: You’ll likely spend $3,000 to $10,000 to furnish your new home and buy appliances.
Ronin: Yikes! So, in summary, buying a home means I’m hemorrhaging money from every possible angle?
Sifu: Afraid so, #1. It comes with the deal. But with careful planning and saving, you can manage it. The trick is to be prepared for the true costs, not just the sticker price.
Ronin: Jesus help me! Guess it’s back to the salt mines for another year before I’m really ready to make the jump.
Sifu: Indeed. Patience and hard work are required. Home ownership isn’t a one and done thing. You need to own the home and the responsibility that comes with it. You think you can really do that, #1?
Ronin: Oh yeah, for sure! Just not today. See you in 12 months, penthouse condo. I’m still coming for you!
Sifu’s Notebook
Shocking Truth: How Much Money You REALLY Need to Buy a Home
Buying your first home is exciting, but saving just enough for the down payment is only the beginning. There are many other costs to consider that can add up quickly. Here’s a breakdown of what you need to plan for beyond just that first big payment.
1. Down Payment: The Starting Point
- Typically 5% to 20% of the home’s purchase price.
- Example: For a $400,000 home, a 10% down payment = $40,000.
- Higher down payment = smaller loan, better interest rates, less need for mortgage insurance.
2. Closing Costs: The Sneaky Extras
- Range: 2% to 5% of the purchase price.
- On a $400,000 home, closing costs might be $8,000 to $20,000.
- Includes:
- Legal fees
- Home inspection
- Appraisal fees
- Title insurance
- Property taxes
- Mortgage fees
3. Moving Costs: Getting Your Stuff There
- Local moves: $1,000 to $2,000.
- Long-distance moves: Can be much higher.
- Additional costs:
- Packing supplies (boxes, tape, etc.).
- Storage fees (if needed).
- Last-minute surprises (more time or labor than expected).
4. Home Insurance: Protecting Your Investment
- Typically $1,200 per year for standard homeowners insurance.
- May need extra coverage for:
- Floods
- Earthquakes
- Hurricanes
- Disaster-prone areas = higher premiums.
5. Property Taxes: The Recurring Bite
- Varies widely based on location.
- Example: A $400,000 home with a 1.5% tax rate = $6,000/year.
- Property taxes can increase over time.
6. Utilities and Ongoing Costs: Welcome to Reality
- Monthly utility costs: $200 to $500.
- Includes:
- Electricity
- Water
- Gas
- Trash
- Internet/cable
- Larger homes or older appliances = higher bills.
7. Maintenance and Repairs: Homes Need Love
- Experts recommend saving 1% to 3% of the home’s value annually for maintenance.
- Example: For a $400,000 home, that’s $4,000 to $12,000/year.
- Common expenses:
- Plumbing/electrical fixes
- Roof repairs
- Appliance replacement
- Lawn and exterior upkeep
8. Furnishing & Appliances: Filling the Space
- Furnishing a new home can easily cost $3,000 to $10,000 or more.
- Major appliances may not be included, like:
- Washer/dryer: $1,000 to $2,000
- Refrigerator: $1,000+
- Stove/oven: $500 to $2,000
- Add costs for:
- Furniture (couch, dining set, beds, etc.).
- Décor (curtains, rugs, etc.).
Bottom Line: How Much Extra Do You Really Need?
Let’s add it all up for a $400,000 home:
- Down Payment (10%): $40,000
- Closing Costs (2% to 5%): $8,000 to $20,000
- Moving Costs: $1,000 to $2,000
- Home Insurance: $1,200 annually
- Property Taxes: $6,000 annually
- Utilities: $200 to $500 monthly
- Maintenance & Repairs: $4,000 annually
- Furnishing & Appliances: $3,000 to $10,000
Estimated Total
You’ll need an additional $20,000 to $30,000 on top of your down payment to cover these extra costs and transition smoothly into homeownership.
