“How much do I actually need saved up?” is one of the first questions every prospective buyer asks, and the honest answer is that it’s more than just the down payment. Here’s a realistic breakdown of what to budget for before you start house hunting in Los Angeles.
The Down Payment
Down payment requirements vary by loan type. Conventional loans can go as low as 3-5% down for qualified buyers, FHA loans typically require around 3.5% down, and VA loans can offer qualified veterans 0% down. A traditional 20% down payment avoids private mortgage insurance (PMI) on a conventional loan, but plenty of LA buyers purchase with less down and simply factor PMI into their monthly budget.
Closing Costs
Beyond the down payment, buyers typically need an additional 2-5% of the purchase price to cover closing costs, including loan origination fees, appraisal and inspection fees, title insurance, escrow fees, and prepaid items like property taxes and homeowners insurance. This is a cost many first-time buyers underestimate.
Cash Reserves
Most lenders want to see that you’ll have some cash reserves left after closing, typically enough to cover a few months of mortgage payments. This isn’t a hard rule for every loan program, but it’s a good financial cushion to have regardless of what your specific lender requires.
Moving and Move-In Costs
Don’t forget to budget for the costs that come after closing: movers, immediate repairs or updates, furniture, and the general expenses of settling into a new home. These add up quickly and are easy to overlook when you’re focused on the purchase price.
Putting It All Together
For a home in the $800,000-$1,200,000 range, which is common across much of the Valley, total cash needed (down payment plus closing costs plus reserves) can realistically range from the mid five figures to well over $100,000, depending heavily on your down payment percentage and loan program. A lender can run your exact numbers based on your specific finances and target price range.
Want a realistic number for your specific situation? Contact James Malcom for a referral to a trusted local lender and a straightforward conversation about what it takes to buy in today’s market.
