How to Save Thousands on Your Home Purchase

Buying a home is one of the most expensive purchases you will make in your lifetime, but that doesn’t mean it has to cost you tens of thousands of dollars upfront. It certainly can—and if you have the funds and it aligns with your financial goals, then go for it. Whether you put down $15,000 or $100,000, real estate remains one of the best financial investments you can make.

I typically recommend that my clients be prepared to spend anywhere from 6% to 8% of the purchase price to close on a home. However, I also work with many first-time homebuyers in the DMV area who don’t have that kind of cash saved for a down payment and closing costs. If that sounds like you, I’m going to show you how to buy a home with minimal out-of-pocket expenses.

Before we get into the details, I want to set expectations. “Little money out of pocket” does not mean $0. There are certain costs associated with homeownership that cannot be avoided—even if you’re using a NACA loan.

I’ll break down the step-by-step process and share real examples of how my clients have successfully purchased their first home with minimal out-of-pocket costs.

Have Money Set Aside for the Transaction

The first thing I want you to do is set aside savings specifically for this transaction. I recommend having at least $10,000 in a high-yield savings account (let your money work for you). I have clients who have leveraged their 401(k) to access additional funds. I’m not advising you to do this, I just want you to be aware of the option. Be sure to research the pros, cons, and penalties before tapping into your retirement savings.

Although I want you to have $10,000 saved, that does not mean you’ll need to spend all of it. But I’d much rather you have it and not need it than need it and not have it.

Here’s where that money will be used throughout the home-buying process:

1. Earnest Money Deposit (EMD)

The first time you’ll come out of pocket during this transaction is when you submit your earnest money deposit (EMD). This is typically 1% of the purchase price and will be sent from your account to the title company handling the transaction.

For example, if the home you are under contract for is $450,000, you’ll need to send $4,500 as an earnest money deposit.

Want to learn more? I made a video covering everything you need to know about earnest money deposits, so be sure to check that out if you have any questions.

2. Home Inspection

The second time you’ll come out of pocket is for your home inspection. This takes place within the first week of going under contract. Expect to spend between $500 and $700 on a licensed home inspector. The cost will vary based on the size of the home and the inspector you choose. It’s important to budget for multiple inspections in case you choose not to move forward with the first home.

3. Appraisal Fee

The third upfront cost is your appraisal fee, which is required by your lender to confirm the home’s value. This typically takes place a few days after the home inspection and costs between $600 and $700.

Some lenders cover appraisal costs as part of their incentives. However, choosing a lender just because they waive this fee may not be the best move if they don’t offer the best financing options overall.

4. Closing Costs and Down Payment

The final time you’ll come out of pocket is at closing when you pay your down payment and closing costs. Since this is where most of your expenses will come from, I will show you how to reduce or eliminate these costs through programs, grants, and strategic negotiations.

Get Pre-Approved—The Most Critical Step

The second thing I want you to do is meet with a lender and get pre-approved. This is by far one of the most important parts of the homebuying process. You can purchase a home without an inspection, without an appraisal, and even without a real estate agent. But if you plan on using a loan, you cannot buy a home without getting pre-approved.

I want you to approach this step with confidence. Your finances don’t have to be perfect, and neither does your credit. Despite what you may have heard in movies, TV shows, or from the general public, mortgage lenders are on your side. They want to help you get pre-approved for a home, and they’re incentivized to do so.

Think of mortgage lenders as niche financial advisors. They are the most experienced professionals to help you qualify for a mortgage and guide you through the process. 

I’ve worked with buyers who put off this crucial step due to fear of rejection or the belief that they need to have perfect financials before applying. But that’s not true. The pre-approval process isn’t just about getting a letter from the bank—it’s for the lender to review your entire financial profile and advise you accordingly.

Here are a few things you might not realize about mortgage approvals:

• You may not need to pay off all your credit cards—in fact, many lenders will advise you not to before applying.

• Your Credit Karma score may not match the score lenders use for mortgage approvals.

• You don’t necessarily need to pay off your car loan—if you have six months or fewer payments left, most lenders won’t count that debt against you.

You’re not going to know any of this without talking to a lender and submitting a pre-approval application. So don’t hesitate or delay—this step is crucial to achieving our goal of buying a home with little money out of pocket.

Choosing the Right Lender

Most down payment assistance programs are lender-specific. This means that if you hear about a specific program, you must use the bank or mortgage company that facilitates that program. While you want a lender who is responsive and communicates clearly, knowledgeable and accessible, and easy to work with; above all, you want a lender who can facilitate the program you need. Here are three key questions to ask your lender if you intend to use a program:

• What down payment assistance or closing cost assistance programs do you offer?

• Do I qualify for any of these programs?

• Can your program be combined with other programs, either through your bank or a state/county-funded program?

Maximizing Assistance through Program Stacking

There are three main types of first-time homebuyer programs: lender-specific programs, state or county-specific programs, and programs facilitated by nonprofits such as NACA or the Birdseed Foundation. To maximize the amount of assistance available, we are going to use a strategy called program stacking.

Program stacking is simply the process of combining multiple assistance programs in a single transaction. Since each program has its own rules and requirements, it’s important to lean on your real estate agent and lender, who will be most familiar with the eligibility guidelines.

In the DMV area, some of the most commonly used state programs include HPAP, EAHAP, DC Open Doors, the Maryland Mortgage Program, and VHDA. If you want a more comprehensive list of down payment assistance programs, I have a free eBook available—click here to download it.

The best strategy for program stacking is to combine a lender-specific program with a state-funded program. You also need to be aware of what each program covers. Some provide money for a down payment, while others help with closing costs specifically.

Every program is going to require you to occupy the property as your primary residence, and some have additional stipulations, such as requiring you to live in the home for a minimum of five or ten years. Others may come with a higher interest rate, which is something to consider when deciding which programs to use.

Working with an experienced lender and agent is crucial because they can help you understand the trade-offs and ensure that the programs you choose align with your personal five- to ten-year plan. Here are two examples of how my clients successfully combined a state program with a lender-specific program to dramatically reduce their out-of-pocket costs.

Negotiating Seller Credits to Reduce Costs

To further reduce out-of-pocket expenses, you are going to try to negotiate a seller credit to help offset your closing costs. A seller credit, also known as a seller subsidy, is a negotiable term in the contract, just like the purchase price and closing date. While it is not guaranteed, it is something you can include in your offer to help achieve your goal.

A seller is more likely to contribute to a buyer’s closing costs if they are motivated to sell. However, whether we can secure a seller credit depends on market conditions and the specific situation surrounding the property. If a home has multiple competing offers, I would likely advise against requesting a seller credit, as it could weaken our offer in a competitive situation.

In our market, sellers typically won't agree to more than 3% of the purchase price. For buyers using a conventional loan, this is also the maximum amount a lender will allow a seller to contribute toward closing costs.

Your Next Steps

As you prepare to take the next steps toward homeownership, it’s important to remember that the goal of this strategy is to reduce upfront costs, but you still need to afford the home long-term.

If you are not comfortable with the monthly payments at your pre-approval amount, assistance programs will not solve that problem. Most programs do not lower your monthly mortgage payments, so ensuring you can afford the home at full price is essential.

If you’re interested in buying a home in 2025, reach out to me or schedule a consultation so we can determine whether program stacking is the right strategy for you.