The amount of money you need to buy a house primarily depends on the down payment, closing costs, and other expenses related to the purchase.
Down Payment
- The down payment is the upfront cash you pay toward the home's purchase price. It typically ranges from as low as 0% to 20% or more depending on the type of mortgage:
- Conventional loans often require a minimum down payment of about 3% to 20%. First-time buyers might put down around 3% to 5%
* FHA loans require a minimum down payment of 3.5% if your credit score is at least 580; otherwise, it can be 10%
* VA and USDA loans may require no down payment at all but have eligibility criteria
* Jumbo loans usually require 5% to 10% or more down
Additional Costs
- Closing costs typically range from 3% to 6% of the loan amount. These include fees for appraisal, title insurance, lender fees, and more
- Other upfront costs include earnest money (1%-2% of the purchase price), moving costs, and possibly remodeling or repair expenses
- If your down payment is less than 20%, you may need to pay for private mortgage insurance (PMI), which increases monthly costs until you reach 20% equity
Example Calculation
For a $400,000 home:
- Down payment (3% to 20%): $12,000 to $80,000
- Closing costs (3% to 6%): approximately $12,000 to $24,000
- Earnest money (1% to 2%): $4,000 to $8,000
- Moving and other costs: $1,000 to $7,000
Total upfront money needed could range roughly from $29,000 (minimum down payment and lower closing costs) to well over $100,000 depending on down payment size and additional expenses
Summary
- Minimum down payment can be as low as 0% (VA/USDA loans) or 3% (conventional loans) but often averages around 10-20% for many buyers
- Closing costs and other fees add several thousand dollars more.
- Plan to have at least 5% to 20% of the home price saved for buying a house, plus extra funds for closing and moving costs.
Your exact amount will depend on the home price, loan type, credit score, and local fees.
