Buying a Home Just Cleaned Out Your Savings Account. Here's What an Expert Says to Do Next

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Would buying a home leave you with next to nothing in savings? That's not the recommended strategy, but experts say there are ways to make it work.

The idea might be on your mind because of how much homebuying can cost these days. The average first-time buyer paid 9% of the home’s value as their down payment in 2024, according to the National Association of Realtors. And typical closing costs, which generally include lender fees, title insurance and taxes, are between 2% and 5%, according to Zillow.

Based on the Census Bureau's median January home sale price above $400,000, a first-time buyer can face some $50,000 in down payment and closing costs. Getting there can take a while: In 2025, it took the average homebuyer seven years to save for a down payment—lower than the peak of 12 years in 2022, but is still higher thanf before the pandemic, according to Realtor.com.

In some cases, homebuyers may need to drain their savings to afford those expenses, said Dan Forbes, a certified financial planner and owner of Forbes Financial Planning, giving them fewer options for addressing other financial emergencies. Investopedia spoke with Forbes about what first-time homebuyers can do to rebuild their savings after a major purchase like a home. This interview has been edited for brevity and clarity.

Many Americans are struggling to maintain their savings, especially as inflation flares and puts pressure on their budgets. However, it is essential to set aside some money for emergencies so they do not have to take on high-interest debt.

INVESTOPEDIA: What does a typical down payment look like for a first-time home buyer?

DAN FORBES: There are different ways you can make [a down payment] if you are a first-time homebuyer.

You can be what's known as a conforming buyer, where you put 20% down and participate under a conforming rate. But there are other states and lenders that offer first-time homebuyer programs, somewhere in the range of 3% to 5% down.

It is actually pretty important that you connect with someone who has a full portfolio of lending options to see what's best, because sometimes the first-time homebuyer program can have some strings attached to it. [For example], the private mortgage insurance will be a factor if you put less than 20% down.

The bottom line is it's just an added expense. So if it's a house you have PMI; if it's a condo, you could have a condo fee when you go to qualify for the loan.

INVESTOPEDIA: How much do you recommend a first-time home buyer have left over in savings after making a down payment?

FORBES: My hope is that even with a first-time home buyer, they might have $10,000, just as a rule of thumb, available just in case there's a repair—or, when you buy a home, there are other considerations, there's furniture, there's tools, there are little alterations that they might make to the home. So if we can have an extra $5,000 to $10,000 available after that down payment and purchase, then that's ideal.

I know sometimes that's not possible. People will drain most of their reserves in order to get into the home. And there it transitions from emergency reserves to "Let's look at the budget and see, what are the methods that we're going to have to take in order to build up that reserve month by month? Where are the available changes that can be made in order to do that?"

INVESTOPEDIA: If given the choice between using all their savings to put 20% down payment or putting less down and keeping more of their savings, which do you recommend a potential homebuyer choose?

FORBES: We're talking about stability [there]. We always want to plan for the worst-case scenario. So, job security, the ability to replenish that emergency reserve quickly after the closing on the home. What condition is the home in? Are any of the systems at risk? The boiler might go out or the roofing—things that could be an immediate or near-term expense.

Ideally, when you go into the purchase, you're really looking to have the lowest interest rate available. And for a lot of programs, that could be a conforming loan. But, if you're comparing that to a first-time homebuyer program, and the rates are similar, then my advice would be, put as little down as possible to get you in the home and preserve that, that emergency reserve.

INVESTOPEDIA: What are some ways a recent homebuyer can quickly rebuild their savings after making a down payment?

FORBES: For ease of operation, we want to focus on one [savings] account. Work everything out of one account so you can see what's going in and what's going out. And, preferably, it would be earning as much interest as possible in some sort of high-yield savings account.

Looking at opportunities to save on insurance, like auto insurance. Hopefully, they've done a good job of looking at different options for that to make sure they're not paying more than necessary for auto insurance or anywhere else.

If they are contributing to a retirement plan at work, we look at immediately reducing that in the near term. If they have to contribute in order to get a company match, we'd like to keep that in place so they're still getting 100% return with the employer's matching of their contributions.

But if cash flow doesn't permit a short-term fix [to their savings], we would want to focus on building up the emergency reserve until it's at a level we're comfortable with, and then we can go back. Usually with a first-time homebuyer we're talking about younger purchasers, who will have plenty of time to make up for retirement plan contributions in the future.

INVESTOPEDIA: While a homeowner waits for their savings to build back up, what are some ways they can protect themselves and their finances in case an emergency expense arises?

FORBES: Looking for extremely low or lower interest rate credit card options is [an option] if there is an emergency. Just avoid getting caught up in a debt trap. But go for loans with as low an interest rate as possible; it could be a home equity line, if that is available. It could be low-interest credit card debt with an introductory rate, just to take care of whatever issues there might be.

And we're revisiting the budget and looking at those line items to see if, as I said, there are retirement plan contributions. Those are the first things we usually look at are our contributions. If they have children, they may be contributing to 529 plans.

Some of these [contributions] are being done automatically. We want to stop those temporarily. Then, we'll do a three-month check-in or a six-month check-in. We [ask] "Were we able to build up our savings to where we want to be? Yes, okay, great, we can restart. No, we're not where we want to be. Okay, we're going to check in again in another three months or another six months."

And we [revisit] those things and make sure we're just on top of it and staying ahead of it, so we're not building up high-interest credit card debt. That's not something any first-time home buyer wants to be faced with.

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