How to Save for Your First or Next Home in Washington, D.C.

Real Estate Education Fleur Howgill August 11, 2023

Whether you are buying your first home or your next home, buying a home in Washington D.C. is a major financial commitment for any homebuyer.  

As of June 2023, the median listing home price in Washington, D.C. was $650,000, trending up 5% year-over-year. Meanwhile, the national median home sales price during that same period was $416,100, down $33,200 from the previous year.

That’s why it is important to have a plan in place for building up a down payment fund to buy a home in Washington D.C.

How Much Should You Save to Buy a House in Washington, D.C.?

The first step should be figuring out your budget and how much money you’ll need to save up to buy a home.

That’s where a great local real estate agent can help. A real estate agent can help you find properties that fit in with your lifestyle, price range, and budget. They can also recommend other service providers, including a mortgage lender who can help you determine how much you can afford and get pre-approved for a loan.

In general, banks and other mortgage lenders prefer a down payment of around 20% of the home’s purchase price, so for a $650,000 home, a down payment would be $130,000.

However, if a homebuyer has excellent credit or can qualify for certain loan programs, like first-time homebuyer, VA, or FHA loans, lenders may consider a smaller down payment.

Just keep in mind: The bigger the down payment, the fewer remaining costs to finance, and the smaller the mortgage, the smaller the monthly payment.

Plus, with a 20% down payment, a homebuyer won’t have to pay private mortgage insurance (PMI), which typically gets added to the monthly payment as well.

In addition to the down payment, soon-to-be homebuyers should plan on saving an additional 2.5-4% in closing costs, $250-$400 for an appraisal, and $200-$600 for a home inspection.

How to Save Money for a House in Washington, D.C.?

Now that you know how much you’ll need to save to buy a house in Washington, D.C., it’s time to start saving! Here are a few tips to help minimize expenses and maximize savings.

  • Reduce spending: Make a budget and look for areas where you can cut back or save. Maybe it’s canceling some unused streaming services or subscriptions or opting out of that summer share in at Rehoboth Beach next year. Track your spending to see if there are any areas for belt-tightening.
  • Automate savings: The easiest way to make savings happen is to use technology to make transfers automatic. Set up your accounts to move a percentage of your earnings from checking to savings each month.
  • Consider a high-yield savings account: If you don’t plan to buy a home in the near future, investing in the stock market or a long-term certificate of deposit is fine. But for short-term savings, putting your money in an HYSA with an online bank can help your money earn more interest than a regular savings account without sacrificing the safety of federally-backed insurance.
  • Save any extra money: Anytime you get some unexpected funds, including birthday or Christmas money, work bonuses or an annual raise, tax refunds, or any money you make from a side gig, aka reselling those Beyonce tickets – put that money into your home purchase fund. It will really add up and you won’t even miss that money (though you will definitely miss Beyonce).
  • Employer Assistance: Some employers offer homebuyer assistance programs as part of their benefits package. Inquire with your HR department to see if any such programs are available.
  • Research home loans: Familiarize yourself with different mortgage options and shop around for the best rates and terms. Consult with lenders to get pre-approved for a mortgage.
  • Check out assistance programs: Look into any first-time homebuyer programs, grants, or tax incentives that might be available in the area where you are looking. For example, both Maryland and Virginia offer first-time home buyer savings accounts, which allow residents in those states to set aside up to $50,000 toward the costs of closing on a new home. The earnings on those funds, as well as interest and capital gains, are exempt from state taxes. Washington D.C. also offers down payment assistance programs (DPA), primarily based on income.
  • Be patient: Saving for a home takes time, especially in high-cost-of-living areas like Washington, D.C. Be patient and willing to adjust your timeline if necessary.

Are you ready to buy a house in Washington, D.C.?

Buying a house in Washington, D.C. can be overwhelming, but having an experienced real estate agent at your side can make the whole process much more manageable. They can help you navigate the housing market, guide you through your financial options, and negotiate the best deal possible.

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