Baby Step 3b is an optional step for people who are ready to buy a home after completing Baby Step 3. During this step, save for a down payment and pay cash for closing costs before moving on to retirement investing.
Before You Begin
- Be debt-free (except for a mortgage).
- Have a fully funded emergency fund of 3–6 months of expenses.
Steps
- Decide whether buying a home is the right next step for your household.
- Set a down-payment goal of 10–20% of the home’s price when possible.
- If you are a first-time homebuyer, set a minimum down-payment goal of 5–10%.
- Add a down-payment savings Fund to your EveryDollar budget.
- Save consistently toward your down payment and closing costs.
- Use your budget to reduce expenses and direct extra money toward your downpayment fund.
Additional Information
Saving a larger down payment can help you avoid private mortgage insurance (PMI) and lower your monthly mortgage payment. Plan to pay cash for closing costs in addition to your down payment.
Baby Step 3b is optional. If you are not ready to buy a home, continue with Baby Step 4 instead.
Do not begin Baby Step 4 while you are actively saving for a home through Baby Step 3b. Resume Baby Step 4 after purchasing your home or deciding to wait.
Next Steps
Open EveryDollar and add a Fund for your down payment and closing costs. Review your monthly budget to decide how much you can save toward your home purchase.