HOW MUCH MONEY DO I NEED TO BUY MY FIRST HOME?

How to protect your equity and attract buyers early.

1. The Down Payment: You May Not Need 20%

One of the biggest misconceptions about buying a home is that you need a 20% down payment. You don’t.

Depending on your financial circumstances and the loan program you qualify for, you may be able to buy a home with as little as 3% or 3.5% down.

Here’s what that looks like on a $600,000 home:

FHA loans, which are popular with first-time buyers, can allow down payments as low as 3.5%. Certain conventional loan programs offer down payments as low as 3%.

A larger down payment generally means a smaller mortgage, lower monthly payments, and potentially lower mortgage insurance costs.

2. Down Payment Assistance: Someone Else May Help Pay Your Down Payment

Some cities, counties, and state agencies offer financial assistance to help people purchase their first home.

These programs are designed to make homeownership possible for buyers who have sufficient income to make monthly mortgage payments but haven’t yet accumulated a large down payment.

Depending on the program, assistance may come in the form of:

• Grants that do not require repayment, provided program conditions are met.
• Deferred-payment loans that may not require monthly payments.
• Special assistance programs for qualifying first-time homebuyers.
• Programs that help with both down payments and closing costs.

Imagine buying a $600,000 home with an FHA loan. Your minimum 3.5% down payment would be $21,000.

If you qualified for an assistance program covering that entire amount, you could potentially purchase the home without having to provide the $21,000 from your own savings.

Not every buyer qualifies, and some programs have income limits, geographic restrictions, funding limits, or repayment requirements. Some assistance is a loan rather than a gift.

3. Closing Costs: The Other Money You Need to Understand

Your down payment isn’t the only expense involved in buying a home. There are also expenses known as closing costs.

These are the costs associated with arranging your mortgage, checking the property, transferring ownership, and preparing for your first months as a homeowner.

They can often amount to approximately 2% to 3% of the purchase price, although actual costs vary. For a $600,000 home, that could mean another $12,000 to $18,000.

4. The Seller May Pay Your Closing Costs

This is where having an experienced real estate agent can make a substantial financial difference.

Although the down payment must come from sources permitted by your mortgage program, closing costs can often be negotiated to be paid by the seller.

Let's return to our $600,000 home. Suppose you are purchasing with an FHA loan:

Now imagine your TWT agent successfully negotiates for the seller to contribute $15,000 toward your eligible closing costs. Your estimated cash requirement could fall from $36,000 to approximately $21,000, excluding any additional expenses, required reserves, or other adjustments.

Seller contributions are subject to mortgage-program limits, appraisal requirements, and the terms of the purchase agreement. A seller isn’t obligated to pay these expenses.

5. Why Your Choice of Real Estate Agent Matters

Buying a home isn’t simply about finding a property you like. It’s about structuring the purchase in a way that makes financial sense.

An experienced agent who regularly negotiates real estate transactions understands how to present an offer that addresses both the buyer’s financial needs and the seller’s objectives.

For example, instead of simply offering the seller $600,000, an experienced agent might negotiate a $600,000 purchase with a $15,000 seller credit toward allowable closing costs.

Buyer agent compensation is negotiable. Depending on the purchase agreement and applicable rules, the seller may agree to pay the buyer’s agent directly or provide an allowable credit toward that expense. Discuss these arrangements with your agent before making an offer.

6. Can Your Family Help With the Down Payment?

Absolutely. Many first-time homebuyers receive financial help from parents, grandparents, or other qualifying relatives.

Depending on the mortgage program, a family member may be permitted to gift some or even all of the required down payment.

For example, if your parents wanted to help you begin your homeownership journey by gifting you $21,000, that money might be used toward the down payment on your $600,000 home.

The lender will generally require documentation confirming that the money is a genuine gift and does not have to be repaid. Discuss the arrangement with your lender before transferring funds.

7. Your Mortgage Payment May Be Higher Than Your Rent. So Why Buy?

In many Southern California communities, the monthly cost of owning a home today may be higher than the rent you’re currently paying. That’s a reality you should understand before buying.

Your monthly housing payment may include mortgage principal, interest, property taxes, homeowners insurance, mortgage insurance, and potentially homeowners association dues. You’ll also be responsible for repairs and maintenance.

You should never purchase a home simply because you qualify for the loan. The monthly payment needs to be comfortable enough to support your lifestyle and other financial priorities.

A home also provides a different kind of stability. It’s your place. Your decisions. Your improvements. Your neighborhood. Your future.

Beyond the financial considerations, there’s something deeply personal about owning your first home. It’s the moment when a house becomes part of your identity.

8. So How Much Cash Do You Really Need?

Let’s summarize our $600,000 example.

These are simplified illustrations, not guaranteed financing offers. Actual cash requirements depend on your loan, eligibility, lender, property, prepaid expenses, and the negotiated contract. You should also retain an emergency fund for unexpected expenses after moving in.

Your First Home Could Be Closer Than You Think

At TWT (The Warburton Team), we believe homeownership is about much more than buying real estate. It’s about creating stability, building equity, establishing roots, and moving toward an extraordinary life.

We’ve helped thousands of Southern California buyers and sellers navigate real estate transactions, and we understand how important it is to have experienced people guiding your decisions.

If you’re thinking about purchasing your first home, don’t assume you need a fortune in the bank.

Find out what you qualify for. Explore down payment assistance. Understand your closing costs. And work with a team that knows how to negotiate on your behalf.

Your first home isn’t just a place to live. It’s a foundation for your future.