The Financial Five: The 5 Costs Every Homebuyer Should Prepare For

One of the biggest mistakes buyers make is focusing only on the down payment and forgetting the full financial picture of purchasing a home. Buying a home involves several upfront costs beyond just qualifying for a loan. I call this framework “The Financial Five” because there are five core financial jars every buyer should intentionally fill before going under contract. When we pair the Financial Five with a strong Pre-Approval through a trusted lender, buyers avoid surprises, strengthen their offers, and move through the transaction with confidence instead of stress.

Jar #1 = Earnest Money, is a good faith deposit submitted with an offer. A strong rule of thumb is around 1 percent of the purchase price. While this amount ultimately applies toward the buyer’s purchase at closing, sellers view earnest money as a signal of seriousness and financial readiness. Offers with very low earnest money can raise concerns about a buyer’s qualifications, especially in competitive markets, so being prepared here directly impacts how strongly your offer appears.

Jar #2 = Down Payment. Varies depending on loan type. VA loans can be zero down, FHA loans typically require 3.5 percent down, and conventional loans often start around 5 percent. Buyers with larger down payments are often more competitive because they may have flexibility with appraisals and financing terms. Preparing this portion of your funds in advance not only helps with loan approval, but it also positions you more favorably in negotiations with sellers who are looking for certainty.

Jar #3 & #4 = Inspection & Closing Costs. A professional home inspection panel generally runs between $600 and $1,000 and is some of the best money a buyer will ever spend. Inspections such as Sewer Scopes, Radon Reports, Mold Testing & Meth Swabbing protect you from inheriting major issues and help you make informed decisions. Closing costs are more variable and depend on loan size, insurance prepaids, property taxes, title fees, lender fees, HOA items and any interest rate buydowns you choose. A healthy planning range for most buyers is roughly $8,000 to $12,000, with more needed if you elect to buy down your interest rate to lower your monthly payment.

Jar #5 = Furnishings is the most underestimated jar when buying a home. This includes anything needed to make the home livable before moving in, such as a fresh coat of paint, new flooring, appliances the seller removed, or updates that improve comfort. A basic starting point is $2,500, but if heavy renovations are anticipated then substantially more money needs to be set aside for after closing. When buyers intentionally prepare for all five of these financial realities, they step into homeownership qualified, confident, and fiscally ready. Filling these five financial jars is one of the smartest ways to create a smooth, predictable, and successful home buying experience. For more information, contact our team for a consultation to prepare a custom plan that fits your situation.