How Much Cash Should You Have on Hand to Buy a House?

Какви средства трябва да имате в наличност, за да купите къща

Are you ready to purchase your dream home? You may dream of beautiful views, a spacious backyard, and the perfect location for you and your family. But before taking that first step in house hunting, one of the most important things to consider is how much cash you should have on hand once you make an offer. While many potential homeowners know they will need some down payment and closing costs when buying a house, there are many other considerations when deciding how much cash should be available during this significant financial transaction. In this blog post, we’ll discuss why having sufficient funds on-hand is essential when buying a home and provide helpful tips so you can set yourself up for success during what could become one of life’s most significant investments!

How much do I need to buy a house?

The Bulgarian dream of owning a home is seen as an aspiration for many, yet it can be pretty expensive to bring it to fruition. In addition to being approved for a mortgage, you must have adequate funds to buy your first house. But how much cash will that require?

Down payment

Ultimately, the size of your down payment is in your hands. Nevertheless, if you want to avoid additional costs or private mortgage insurance fees, put down an amount equal to 20% of the home’s purchase price for a down payment which is the standard down payment in Bulgaria’s big cities. In small villages, the down payment percentage is higher.  Due to increasing interest rates, the banks are not getting so many clients, which means less clients, which means you can negotiate your terms if you can prove your ability to pay back the loan.

Tips for building your down payment fund

When you’re ready to purchase a house, coming up with the necessary down payment can seem daunting. Here are some valuable strategies for amassing those funds:

  • Look for local support: If you’re hunting for your first home, inspect what programs are available in the city or state where you wish to purchase. There may even be free grants and zero-interest loans available for your down payment cost if you meet certain low-to-moderate income conditions!
  • Identify every expense you can cut: To save money, curb spending. Is it time to cancel the cable? Could you get a better deal on cell phone service? Should you cut down on eating out this month? Look at your weekly and monthly expenses to identify where to reduce costs.
  • Put your savings to work: Don’t let your hard-earned money sit around and gather no returns; from CDs to high-yield savings accounts, all extra pennies matter. Compare interest rates on viable options where you can securely store your cash – rest assured that investing in the correct statement will be worth it. Regardless of the instrument you choose, ensure that it will be readily available when it comes time to access your funds. For example, if you’re aiming to purchase a home shortly, it is likely best to keep your money saved in an easily accessible savings account.
  • Ask for help: If you have a loving family member or dear friend with the means to help, they can provide a gift towards your down payment. Of course, lenders need assurance that the money is indeed given without expecting repayment. To this end, you’ll be expected to submit a gift letter from them confirming as much.

Closing costs

Purchasing a house entails considerable closing costs that can sneak up on you rapidly if you’re not mindful. Therefore, it’s essential to save enough cash in advance to take care of those expenses when the time comes. Generally, homeowners pay approximately 2-3% of the purchase price for closing costs. If you’re lucky and able to negotiate with the silicone, get them to shoulder a portion of this expense.

Home Maintenance and Repair

When purchasing a new home, many individuals easily remember to set aside the funds for their down payment and closing costs. However, it is essential to remember to have some extra cash saved up for any foreseeable maintenance or repair needs that could come up in the initial months of ownership. When budgeting for unexpected home repairs, there is no one-size-fits-all answer. However, a practical guideline would be setting aside 1 or 2 percent of the home’s value into a savings account in preparation for potential issues. If your residence is new and still under warranty, you could get away with saving less money on maintenance costs. However, if your home is of an older variety and has previously had maintenance, it is wise to save some extra cash in case any difficulties arise.

In addition to the three main costs associated with buying a home, there are minor expenses, such as new account fees from certain utility suppliers, that you must consider. Be sure to plan for these additional outlays when budgeting for your house. These costs can quickly accumulate if you are well-equipped with a stockpile of funds. Nevertheless, by being proactive and able to afford such expenses, you will soon bask in the warmth of your newly acquired home.

How to prepare to buy a home

Now that you have determined the money needed to buy a house, it’s time to figure out how best to prepare for this purchase. Here are a few steps to make sure you’re ready!

  1. Check your credit.

Mortgage lenders use your credit score, in combination with other aspects, to measure your reliability. Fortunately, you can obtain a free copy of your credit score from all three major credit reporting agencies weekly through 2022 – an extended service due to the pandemic (commonly available annually).

Nowadays, many online services offer free credit scores, and so might your bank. However, if your score is on the lower side of the spectrum, it would be wise to improve your credit before applying for a mortgage.

  1. Create a budget.

To develop a reasonable budget, you must thoroughly assess your costs – vehicle payments, student loans, transportation and food bills, energy expenses, and more. According to numerous experts, the 28/36 percent rule should be followed; no more than 28% of gross monthly income on housing costs and not exceeding 36 % in total debt, including house-related expenses.

  1. Save for a down payment.

Generally speaking, you’ll need to put down around 3 percent of the purchase price when buying a house. It’s worth noting that if you can manage 20 percent or more as an initial payment, you will avoid paying for mortgage insurance – which might seem daunting but is nothing to be afraid of! A conventional loan can spare you from paying the fee after you have accumulated 20% equity in the property, which is obtained through payments and an appreciation of value.

  1. Shop for a lender.

Getting preapproval from a lender before searching for a house can be immensely beneficial. This not only makes an individual appear more severe to potential sellers but also provides them with the knowledge of how much they are able and willing to spend on their future home. To begin this process, getting quotes from at least three different lenders is wise to maximize one’s chances of finding the best deal possible!

  1. Be willing to compromise.

As housing costs continue to climb, finding a home that fits your budget cannot be easy. Being flexible with what you consider essential property features is critical – maybe giving up on having an attached garage or skipping out on needing a finished basement would help alleviate some financial strain. A significant part of homeownership is that you always have the option to expand and upgrade in future years.


When budgeting for a house purchase, the listing price is only part of the equation. Considering all upfront and continuing costs before taking on a mortgage is essential. Carefully assess your monthly finances to make sustaining payments and other expenses manageable in the long run.


How do you prepare to buy a home?

Before you start your house-hunting journey, examine and elevate your credit score if needed. Additionally, begin stockpiling funds for a down payment and closing costs to be financially ready when the right home comes. As an additional step in personal finance optimization, consider paying off existing debts such as student loans or any lingering credit card balances to optimize your debt-to-income ratio before getting preapproved for a mortgage.

What is a mortgage preapproval, and why does it matter?

Before you embark on your home search, becoming preapproved for a mortgage is critical in ensuring that real estate agents and sellers take your offer seriously. Mortgage preapproval involves having a lender verify your creditworthiness and provide an agreement to loan up to certain limits. This can be incredibly beneficial when making an offer, as some will only accept proposals from preapproved buyers!

Why is the debt-to-income ratio important when buying a house?

When buying a home, your debt-to-income ratio (DTI) is the crucial indicator of whether you can afford one and how much. The DTI requires dividing your total outstanding debt by your gross monthly income – the lower this number is, the bigger house you can take on! Put another way: reduce existing debts now for more significant homeownership potential down the line.

What is the best mortgage for first-time home buyers?

When selecting the perfect mortgage loan for first-time buyers, you’ll want to choose one that matches your qualifications. FHA loans are popular due to their lenient requirements, but conventional loans with as little as 3% down may be a better fit depending on your finances.


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