How Much Money Do You Need to Buy a House?

How much money do you need to buy a house? It’s one of the first questions many homebuyers ask, and for many people, the answer is less than they expect.

You do not always need a 20% down payment to buy a home. Depending on the loan program, some buyers may qualify with a much smaller down payment, and certain programs may allow no down payment at all. The amount you need will depend on the price of the home, your loan program, closing costs, and whether any credits or assistance are available.

Step 1: Plan for Your Down Payment

Your down payment is the amount of the purchase price that you pay upfront instead of financing through your mortgage.

The amount required depends on the loan program you use.

Conventional loans: Some qualified buyers may be able to put as little as 3% down.

FHA loans: Qualified buyers may be able to put as little as 3.5% down.

VA loans: Eligible borrowers may qualify for financing with no down payment.

USDA loans: Eligible borrowers purchasing an eligible property may also qualify for no-down-payment financing.

Putting more money down can reduce the amount you borrow, but 20% is not required for every buyer.

Step 2: Budget for Closing Costs

Your down payment is only part of the money you may need when buying a home. There are also closing costs associated with completing the purchase and setting up your mortgage.

These costs may include:

• Lender fees
• Appraisal costs
• Title and settlement fees
• Property taxes
• Homeowners insurance
• Prepaid interest
• Escrow deposits
• Recording and government fees

Closing costs vary from one purchase to another. Your lender can give you a better estimate based on your loan, purchase price, and property.

Step 3: Understand Earnest Money

When you make an offer on a home, you may be asked to include earnest money with your purchase agreement.

Earnest money shows the seller that you are serious about purchasing the home. If the transaction moves forward as planned, that money is generally credited toward the amount you owe at closing.

The amount can vary depending on the home, the purchase agreement, and the local market.

Step 4: Plan for Inspections and Other Upfront Costs

There can also be expenses before closing that are easy to overlook.

You may want to budget for:

• A home inspection
• Additional or specialized inspections
• Moving expenses
• Repairs or updates
• Furniture or appliances
• Emergency savings

It can be tempting to use all of your available savings toward the down payment, but having money left over after closing can make homeownership much more comfortable.

Step 5: How Much Money Do You Need to Buy a House?

Here is an example using a $400,000 home.

You can also use our Mortgage Calculator to estimate what different down payment amounts could look like.

Your down payment could look like this:

• 0% down: $0
• 3% down: $12,000
• 3.5% down: $14,000
• 5% down: $20,000
• 10% down: $40,000
• 20% down: $80,000

These numbers are for the down payment only. Your total amount due at closing can also include closing costs and prepaid expenses, minus any credits or assistance you may receive.

This is why two buyers purchasing homes at the same price can end up needing very different amounts of money.

Step 6: Ask About Down Payment Assistance

If saving for a down payment or closing costs is one of your biggest concerns, it is worth asking whether you qualify for assistance.

Programs vary based on things such as:

• Where you are buying
• Household income
• Loan program
• First-time homebuyer status
• Property type
• Occupancy requirements

Some programs may offer loans, deferred repayment, forgivable assistance, or other forms of help.

Not every buyer will qualify, but it is worth exploring your options before assuming you need to save everything on your own.

Step 7: Find Out Your Actual Cash to Close

The best way to know how much money you need is to look at your specific situation.

Your cash to close can be affected by:

• Purchase price
• Loan type
• Down payment
• Closing costs
• Earnest money already paid
• Seller credits
• Lender credits
• Down payment assistance

Two buyers can purchase homes for the same price and still have very different cash requirements.

That is why it can be helpful to get pre-approved early. Once your lender reviews your situation, you can get a much clearer idea of how much money you should plan to have available.