The costs of buying and owning a home can add up quickly, so it’s important to prepare. You’ll want to save money, improve or maintain your credit and compare lenders to get the best mortgage rates possible. When it comes to determining their budget based on their individual situation, lenders, accountants, financial planners are the folks I recommend buyers reach out to.

The down payment is the part of the home’s purchase price you pay upfront, rather than financing it through a mortgage. If you’re buying a $200,000 home, for example, and put 10 percent down, or $20,000, you’d be getting a mortgage for $180,000.

If you choose a conventional or FHA loan, a down payment is required. The amount of the down payment that’s needed is based on the home’s price and property type, as well as the loan product.

For a conventional loan, exactly how much depends on the lender and loan type — you might put down 3 percent, 10 percent, 20 percent or more. With an FHA loan, you could be able to put down as little as 3.5 percent.

It’s important to note that there are loans without a down payment requirement: USDA loans, for borrowers buying in designated markets (generally rural), and VA loans, for eligible service members and veterans.

To close on your home loan and get the keys to the property, you’ll need to pay closing costs, which are all of the fees associated with the mortgage. These range typically from 2 percent to 5 percent of the loan principal, and can include:

If you’re lean on savings, however, many lenders offer a no-closing-cost mortgage option, in which the closing costs are added to your loan principal or otherwise paid for in the form of a higher interest rate. Both save you from having to bring cash to the closing upfront, but can cost you more in the long run, especially if you intend to stay in the home long-term.

When buying a home, there are two kinds of insurance to consider: homeowners insurance and private mortgage insurance, or PMI.

Homeowners insurance protects you financially from unexpected events that damage your home, such as natural disaster, theft or vandalism. Though homeowners insurance isn’t required by law, most mortgage lenders require it in some form. The cost significantly varies, and there are many options, so it’s best to compare offers to keep the expense as low as possible.

If you get a conventional loan, PMI is generally required if you put less than 20 percent down. This kind of insurance protects the lender if you default on the loan, and can considerably increase your mortgage payment. According to the Urban Institute, annual PMI premiums range from 0.58 percent to 1.86 percent of the loan amount.

PMI isn’t permanent, however. As you pay down your mortgage and build equity in your home, you can get rid of PMI.

What are your thoughts? Let us know in the comments!

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