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Getting Your Finances Ready for Your First Home Purchase Saving for your first home feels like training for a marathon - you know the finish line exists...
Saving for your first home feels like training for a marathon - you know the finish line exists, but some days it seems impossibly far away. The good news is that understanding exactly what you'll need financially can make the process feel much more manageable.
Most first-time buyers focus entirely on the down payment, but that's just one piece of the puzzle. Here's a realistic breakdown of what you'll actually need to have ready when you start shopping for your first home.
You've probably heard you need 20% down, but that's not always true. Many first-time buyer programs allow for much less. FHA loans require just 3.5% down, and some conventional loans accept as little as 3%. VA loans for qualifying veterans require zero down payment.
For a $200,000 home (which gets you a nice starter home in many parts of Brown County), that 3.5% FHA down payment would be $7,000 rather than the $40,000 you'd need for 20% down. That's a significant difference that can help you become a homeowner years earlier.
Keep in mind that putting down less than 20% typically means you'll pay mortgage insurance, which adds to your monthly payment. But you can often remove this later once you've built enough equity.
Beyond your down payment, expect to pay 2-5% of your home's purchase price in closing costs. These cover everything from your lender's fees to title insurance, appraisals, and inspections.
On that same $200,000 home, you might need an additional $4,000-$10,000 for closing costs. Some of these you'll know about upfront, like your home inspection fee (usually $300-$500). Others, like title insurance or recording fees, get calculated closer to your closing date.
The good news is you're not flying blind. Your lender will provide a Loan Estimate within three days of your application that breaks down these costs. You can also ask your real estate agent for estimates based on recent transactions in the area.
Here's what catches many first-time buyers off guard: you need money left over after you buy the house. Even if you've found the perfect move-in-ready home, things happen. Water heaters fail, furnaces need repairs, and you might discover the previous owners' idea of "good condition" differs from yours.
Plan to keep at least $2,000-$5,000 in savings after your closing. This isn't just for emergencies - you'll also want money for immediate needs like changing the locks, utility deposits, and probably some basic furniture or improvements.
Your mortgage payment includes more than just principal and interest. Property taxes, homeowner's insurance, and possibly mortgage insurance all get bundled into that monthly payment through an escrow account.
Property taxes in Brown County vary by location and your home's assessed value. Your lender will estimate these based on current tax records, but remember that buying a home often triggers a reassessment that could change your tax bill.
Homeowner's insurance costs depend on your home's age, location, and features. A newer home or one with updated electrical and plumbing typically costs less to insure. If you're looking at homes built before 1970, factor in potentially higher insurance costs.
Once you start seriously house hunting, avoid making big financial changes. Don't open new credit cards, make large purchases, or change jobs if you can avoid it. Lenders verify your financial situation right up until closing, and changes can delay or derail your loan approval.
If you're planning to buy in spring or summer 2026, start organizing your finances now. Gather recent pay stubs, tax returns, and bank statements. If you're self-employed, you'll need additional documentation showing consistent income.
Lenders typically want your total monthly debt payments (including your new mortgage) to be no more than 43% of your gross monthly income. This includes credit cards, student loans, car payments, and any other recurring debt.
If your debt-to-income ratio is higher than lenders prefer, you have options. You can pay down existing debt, increase your down payment to lower your mortgage payment, or look at less expensive homes.
Pre-qualification gives you a rough idea of how much you might borrow based on basic financial information. Pre-approval involves submitting documentation and getting a conditional commitment from a lender.
In competitive markets like some areas of Brown County, pre-approval makes your offers much stronger. Sellers know you're a serious buyer who can actually close the deal.
Indiana offers several first-time homebuyer programs that can help with down payments or closing costs. The Indiana Housing and Community Development Authority provides below-market interest rates and down payment assistance for qualifying buyers.
Some of these programs have income limits or require you to complete homebuyer education courses, but they can significantly reduce the cash you need upfront.
Getting your finances ready takes time, but breaking it down into specific goals makes it achievable. Focus on building your down payment fund first, then work on minimizing other debt and stabilizing your income. Before you know it, you'll be ready to start seriously shopping for your first home.