A Guide to Budgeting for New Homeowners

Be prepared for new expenses

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First-time homebuyers have a lot of new territory to navigate. Perhaps one of the most important changes to make after buying a house is to refocus your finances. After all, you'll be facing new expenses like home maintenance costs and different utility bills, so it's the ideal time to reshape your overall budget.

Learn how your budget will change after you buy a home and how you can proactively plan for it.

Key Takeaways

  • Being a homeowner can be a bigger financial burden than first-time homebuyers anticipate.
  • Restructure your budget to make room for additional spending categories and to increase savings that can cover routine maintenance as well as future upgrades.
  • Build an emergency fund of several months' worth of expenses so you’ll be ready to cover unexpected home repairs.
  • You can protect your home and your financial health with homeowners insurance, but upgrading your budget may call for increased coverage for other policies as well.

How To Budget After Buying a House

Daniel Milan, managing partner of Cornerstone Financial Services in Southfield, Michigan, told The Balance in a phone interview that "to maintain your financial health as a new homeowner, prepare your budget for the changes you'll face."

If you're going from renting to owning, you'll want to evaluate the changes in your regular monthly expenses. If you're moving to a bigger property, your living expenses will likely increase because you'll be paying more for utilities, and you'll be responsible for covering any maintenance or repair issues that arise.

One common mistake new homeowners can make is that after they've been so focused on saving for the down payment and what they can afford for the mortgage, they forget about the other variables that come with homeownership, Milan said.


Scrutinize the line items in your budget and see where you can make some realistic adjustments. You might want to start, for example, by cutting out some discretionary spending, whether it's putting limits on entertainment or scaling back vacations.

Once you identify ways to cut back your expenses or increase your income, you can start to allocate those dollars into some new "buckets," or savings and spending categories.

Putting Aside Additional Savings

Putting down a bigger down payment on a home can have a number of benefits, from a lower interest rate to lower mortgage payments. However, ensure you still have enough cash reserves to meet your other goals. Plus, many mortgage lenders will require that you have ample savings available before approving a loan.

You're likely to use some of your cash reserves for immediate expenses such as closing costs, moving expenses, new furniture, or renovations. No matter the situation, aim to have enough savings that can, at a minimum, cover a few months of monthly expenses. The exact amount you should have after buying a house will depend on your personal situation and other personal savings goals.

Emergency Fund Changes

A common new change in many first-time homebuyers' new budgets is an increased emergency savings. Financial experts typically recommend aiming to put aside at least three to six months' worth of living expenses to cover unexpected expenses, such as car repairs or medical treatment, or cover your bills if you temporarily lose income.

As a new homeowner, those surprise expenses now include home repairs such as a water heater replacement or plumbing repairs. Furthermore, the monthly expenses you'll need to cover may have increased as a homeowner. You may have higher utility bills or a larger monthly housing payment.


Recalculate your monthly obligations and make sure an emergency fund in your budget aligns with 3-6 months' worth, so you're prepared financially.

Should Your Retirement Savings Change After Buying a Home?

Aim to avoid using your long-term, retirement savings to meet your short-term cash needs, including for additional home expenses, Milan said. Instead, budget for additional expenses in other ways, like by reducing unnecessary spending or increasing your income.


Consider speaking with a financial advisor to help you make adjustments to your finances. Aim to strike the right balance between your short-term budget and long-term investment strategies.

Mortgage-Related Expenses

It's simple to anticipate how your new mortgage will affect your budget, but the mortgage alone is not the full picture of your home loan, and your budget can benefit from breaking it down even further.

Your monthly mortgage payment often includes principal, interest, taxes, and insurance (PITI for short), but not always. In some cases, you might need to pay property taxes outside of your mortgage payment. Insurance also comes in many forms related to homeownership and policies that are charged independently (discussed in more detail below). It's important to consider these additional expenses in your new homeowner's budget.

If your down payment on the home was less than 20% of the purchase price, for instance, you might need private mortgage insurance (PMI). Conventional lenders require borrowers to have PMI to protect loans with down payments below 20%, but many government-backed lenders do not (though they may have other methods to secure the loan).

New Insurance Coverage Needs

One of the most important new expenses to factor into your homeowner's budget is homeowner's insurance. Unlike PMI, which protects your loan, homeowner's insurance is for the property itself and will cover the cost for certain types of damages, so you don't have to pay out of pocket.


Look into bundling your property insurance with extra umbrella insurance coverage. This provides additional personal liability insurance that goes beyond what your typical policies cover.


Expanding Other Insurance

You may also want to expand other insurance coverages such as life insurance or disability insurance as well. That way, you or your surviving dependents can stay in financial health while covering the expense of your home. After all, you never know what life may bring, which is why you want to be prepared if something should happen to you (or your partner, if you're in a dual-income home).


To determine how much life insurance you need, Milan recommended taking your full mortgage amount and adding in a year of earnings. So, for example, if you have a $200,000 home loan and you make $50,000 per year, a $250,000 policy may be right for you.

Many people choose life insurance policies that cover the full mortgage term at a minimum, Milan said. Prices will vary depending on the size of the policy, as well as your health and age. Work with a financial advisor who can guide you in choosing the right policy for your specific financial situation.

Managing New Expenses as a Homeowner

Besides your mortgage payment, many other costs can take new homeowners by surprise. For instance, you may have to pay for your water and private sanitation, or you could face higher utility bills.

Ideally, you should ask for an estimate of what water, electricity, and gas costs from the previous owner before you move in.

How Much Should You Save Each Year for Home Maintenance?

Home maintenance expenses will vary depending on your location, as well as the size, age, and condition of the home. One rule of thumb is to set aside 1% of your home price for maintenance. So, for example, if your home's value is $400,000, try to save $4,000 per year for maintenance.

Annual upkeep costs you'll want to plan for can include:

  • HVAC maintenance
  • Gutter cleaning and minor roof repair
  • Interior and exterior painting
  • Lawn care and snow removal

Long-term, major areas for repairs and replacements to factor in a savings plan include:

  • Hot water heater
  • Siding
  • HVAC 
  • Plumbing systems
  • Roof
  • Appliances

The Bottom Line

Renters tend to have predictable monthly expenses, but being a homeowner can involve unexpected costs for repairs and ongoing maintenance expenses. As an owner, you'll have a bigger incentive to protect the property.

You can make financial adjustments such as padding your savings, anticipating home maintenance costs, and reevaluating your insurance needs so you can transition into homeownership with less financial stress.

Frequently Asked Questions (FAQs)

How soon can I sell a house after buying it?

You can sell a home as soon as you like after buying it, but keep in mind that the transaction will entail closing costs. So if you haven't built up much equity, the costs and fees involved with selling could mean you will lose money if you sell too soon.

What happens if I lose my job after buying a house?

If you lose your job after buying a house, you have a few options to avoid foreclosure. If you can't continue to make mortgage payments from cash reserves, contact your lender to review your options. Many lenders offer hardship or forbearance programs that allow you to postpone or reduce payments for a set amount of time. You can also reach out to a HUD-approved housing counselor for free advice.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. "Budget for New or Changed Expenses."

  2. Fannie Mae. "Minimum Reserve Requirements."

  3. Vanguard. "What's the Right Emergency Fund Amount for You?"

  4. My Home by Freddie Mac. "The Math Behind Putting Less Than 20% Down."

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