First-Time Home Buyer Budget, Done Right
The most common first-time buyer mistake is budgeting only for the down payment and monthly mortgage. Here is the full picture.
The Six Line Items
1. Down payment (3% – 20%) On a $350,000 home: $10,500 (FHA) to $70,000 (20% conventional).
2. Closing costs (2% – 5%) On $350,000: $7,000–$17,500. Includes loan origination, appraisal, title insurance, escrow, and state taxes.
3. Moving + immediate needs (1% – 3%) $3,500–$10,500. Movers, utility deposits, basic furniture, appliances the sellers took.
4. Initial repairs (budget 1% of price) $3,500 for things you discover the first month: leaky toilet, broken window, HVAC tune-up.
5. Post-closing emergency fund (6 months expenses) For a new mortgage of $2,200 + other expenses $3,000 = $31,200 in reserves.
6. Year-one maintenance (1% – 2% of price) $3,500–$7,000 that will not come out of the monthly mortgage.
Your DTI Target (Not the Lender's)
Lenders approve up to 43% DTI. First-time buyers should target 28% front-end / 33% back-end for the first home. Your income will likely grow, but your first-home debt stays fixed — leaving room for kids, career changes, and rate shocks.
The Starter Home Reality
Do not buy the "forever home" as your first. First-time buyers who stretch to a 4-bedroom are 3x more likely to sell within 5 years — at a loss once you factor closing costs both ways. Buy the home you need for the next 5 years, not 20.
Use the calculator above to set your ceiling. Then look at homes 10% below it.