It’s not the best time to buy a home, but I’m certainly not the only American who’s hoping to become a homeowner in 2024. We’re facing higher mortgage rates than we’ve seen in a few years — as of this writing, the average rate for a 30-year fixed mortgage loan is 6.61%, according to Freddie Mac. Homes themselves are more expensive, too — in November 2023, the median existing home price was $387,600 (per the National Association of Realtors). This is 4% higher than just a year prior.

If you’re getting ready to pry open your savings account and shake out a huge pile of money to buy a house, you might be tempted to sink everything you’ve got into the purchase. Let’s discuss the costs you’ll pay when you buy — and why leaving yourself broke in the process is a dangerous move.

What expenses do you face when you buy a home?

When you’re trying to get on the property ladder, your costs are wide and deep. For the actual buying process itself, your largest expense is likely to be a down payment. If you’re buying with an FHA loan or other government-backed mortgage option, you might not need to make a large down payment — with a credit score of at least 580, your down payment on an FHA loan need only be 3.5% of the home’s purchase price. If you’re buying with a conventional loan, however, it’s generally recommended to put down 20%, so you can avoid the added cost of private mortgage insurance.

You’ll also need to cover closing costs when you sign on the dotted line for your mortgage loan — this will include appraisal, application, and underwriting fees. You could also pay for a real estate attorney, property survey, and credit check fees. Closing costs often amount to around 2% to 5% of what you borrow and your mortgage lender will provide you with a breakdown of the costs.

Along the way from house hunter to homeowner, you could also be on the hook for some initial remodeling or improvements to your new home. How about a new refrigerator or stove, perhaps? Personally, it’s my plan to spend some money and time on painting my house when I get it — years of rentals with bland white walls (or worse, ugly wood paneling) has me craving real color in my life. Plus, you’ve also got to cover the cost of your actual move. Hiring movers likely won’t be cheap, but it’ll make the process much easier.

What happens if you leave yourself broke?

Simply put, nothing good. Imagine this: You’ve scrimped and saved to cover the above costs, and managed to find a home to buy that matches the amount you have saved. You made a down payment, paid those closing costs, undertook a few nice improvements to your new home sweet home, and paid a crew of burly movers to haul your belongings inside.

But not a week after you move in, you wake up to no hot water in your house. Your water heater has given up on you, and you now must cough up money to have it replaced. It’s going to cost you $1,500, which is in line with the average costs enumerated by Architectural Digest for a water heater replacement. Except, all your money went to the buying process, so you’re now looking at putting that charge on a credit card. In the grand scheme of things, $1,500 is not a huge tab to put on a credit card — it’s still not ideal, though. And what if the problem isn’t your water heater, but your roof, and your bill to replace that is $10,000?

Prioritize your emergency fund

Having an emergency fund to help you cover unplanned bills is always a great idea if you can manage it. Living without emergency savings is stressful — I’m sorry to say I know that from experience. If you’re buying a home, I recommend prioritizing your emergency savings even more heavily. It would be tremendously depressing to fight through this housing market, buy a home, and immediately take on credit card or personal loan debt to cover a home repair.

As a homeowner, your emergency fund becomes even more important. Don’t drain your savings in the process of buying a house. It’s worth waiting a little longer to buy if it means you can give yourself an even bigger cushion for a rainy day.

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