Save the cash

You have heard you need 20 percent down to buy a home. For most first-time buyers, that is old news. Plenty of people get in with 3 to 5 percent down. That is the down payment: the cash you put in up front when you buy.

So what is the trade for putting less down? It is called PMI, an extra monthly cost most lenders add when your down payment is under 20 percent. Think of PMI as the price of getting in the door years earlier instead of waiting to save the full 20 percent. And it does not last forever. As you pay the loan down and the home gains value, your equity grows. Once you own about 20 percent of the home, PMI can drop off.

Here is the cost that surprises almost everyone: closing costs. These are the fees to finish the deal, like the lender, the title company, and some taxes. Plan on about 3 percent of the price.

The catch is this money is due at the end, on top of your down payment. So you save for both from day one. Miss this, and you can have the down payment ready and still come up short at the table.

When people picture a house payment, they picture the loan payment by itself. That number is a trap. The real monthly cost of a mortgage has four parts, and the short name is PITI.

• P is principal: the part of each payment that chips away at what you borrowed.
• I is interest: the price the bank charges for the loan.
• T is taxes: property taxes on the home, usually collected a little each month.
• I is insurance: homeowners insurance, which lenders require and also fold into the monthly bill.

When your down payment is under 20 percent, add PMI on top of those four. The lesson is simple: never budget on the loan payment alone. Say a home's loan payment is $1,200 a month. Add $250 in taxes, $100 in insurance, and $120 in PMI, and the real monthly cost is closer to $1,670. That extra $470 is the part that catches people off guard.

The calculator above works in two directions, and both are useful.

Forward, price to payment. Type in a home price and it shows your full monthly PITI. This lets you see the real number before you fall in love with a listing. A price that looks fine on the sign can turn into a payment that does not fit. Taxes, insurance, and PMI get stacked on top.

Flipped, payment to price. Already know the monthly payment your budget can carry? Flip it. Type in that monthly number and it shows the price range that fits. This keeps you shopping in your own lane. You never tour a home that was going to break your budget from the start.

Cash sitting in your checking account gets spent. It always does. So give your house money its own home: a separate savings account with a plain name like House Fund. When it is named and kept apart, you stop treating it like spending money.

Then take yourself out of the decision. Set an automatic transfer for every payday, so the money moves before you can touch it. A small amount that leaves on its own beats a big amount you keep meaning to save. This is the same steady plan the goals page builds, and this account is where that plan lands.

Neither number depends on a lucky month or a raise. It is the same move every payday, counted and safe, until the total is sitting there waiting for you.