How much money do you need to buy a house?
A breakdown of the upfront and ongoing costs you’ll need to prepare for before buying a home.
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Key takeaways
Buying a house requires more than just the purchase price. You’ll need funds for your down payment, closing costs, prepaid expenses, inspections, moving, and repairs.
Typical upfront costs range from roughly 3–20% of the home’s value for the down payment, plus an additional 2–5% for closing costs, depending on your lender, loan type, and location.
Planning ahead with a savings strategy and budgeting for ongoing homeownership expenses can help ensure you’re financially ready for both the purchase and long-term responsibilities.
The major upfront costs of buying a house
Unless you have enough cash to make an offer on a house, you are most likely going to need a mortgage to finance your purchase. When buying a house, there are several one-time payments beyond the price of the property you should be aware of. From down payments to home appraisals and inspections, these upfront costs can vary depending on location, lender, and loan type but should be considered when determining how much money you need to buy a house so you are not taken by surprise with these additional expenses.
Here are six common upfront costs to consider:
1. Down payment
The down payment, or the amount of money you contribute to the home purchase upfront, is a good start to figuring out how much it costs to buy a house. While there is no one-size-fits-all amount for a down payment, percentages generally range from 3–20% of the home’s purchase price (which would be $100,000 upfront for a $500,000 house), but the actual amount may vary depending on the loan type.
Here are the minimum down payment percentages for five common home loan programs for a primary residence, single-family home:
Minimum down payment | Mortgage type |
0% (must meet certain requirements) | Veterans Affairs (VA) loan1 |
0% (must meet certain requirements) | U.S. Department of Agriculture (USDA) loan2 |
3% | Conventional conforming loan3 |
3.5% (typically, may be higher for borrowers with lower credit scores) | Federal Housing Administration (FHA) loan4 |
5–20% (varies depending on the lender and your credit score) | Jumbo loans5 |
2. Closing costs
Closing costs are another expense to factor in aside from the down payment. While exact costs may vary based on the location you are buying, they are generally 2–5% of the home’s price. Your lender, loan type, and loan size may also influence how much you pay.
Closing costs can include:
Lender fees (origination, application, underwriting)
Title insurance and title search
Escrow fees
Attorney fees (in states where required)
Credit report and flood certification fees
Recording fees paid to local government
Appraisal fees
Home inspection fees
Loan origination fees
Courier fees
Bank processing fees
Notary fees
Shopping around for loans can help you compare fees to see what best fits your budget. It is also important to note that fees may be due at closing if you used an attorney or real estate agent during the process.
3. Prepaid expenses
Prepaid expenses when buying a house refer to the upfront payments made at closing for certain recurring expenses such as:
Property taxes (may vary but are often several months’ worth)
Homeowners insurance premiums
Prepaid interest, covering interest from closing until your first payment
4. Home inspection
Home inspections are optional but often recommended to uncover potential structural, electrical, or plumbing issues. Inspection fees may vary depending on the size, location, and age of the home but may range from $300 to $800. This is an out-of-pocket expense, and costs may increase for larger homes or if a specialized inspection is required (e.g., pool inspections).
5. Moving costs and immediate repairs
Once you’ve closed on your home and paid your down payment, the next part is moving in. National average mover costs can range from $302–$1,495 or $651–$5,491 for long-distance moves, according to Thumbtack data.
Moving costs can also vary if you move on your own in a DIY manner, but you may still want to factor in appliances, moving supplies, or potentially even rental vehicle fees (e.g., U-Haul rentals).
If your house needs immediate repairs, such as deep cleaning, painting, or changing of locks or appliances, this may also add to your overall expenses. Major maintenance repairs could further increase these fees.
6. Earnest money deposit
An earnest money deposit is a good-faith deposit made by a buyer to show the seller they are committed to buying the property. This payment is typically held by a third party in an escrow account until closing and is then applied to your down payment, so it is not technically an additional cost. Earnest money deposits may vary but tend to range from 1–5% of the home’s purchase price.
Example: Upfront costs for a $550,000 home purchase
Now that you’re aware of potential fees to look out for when buying a house, let’s consider a hypothetical example to see how much this would total out to.
Here’s a theoretical example of how much money you might need upfront when buying a $550,000 home, based on the major upfront costs (down payment, closing costs, inspections, etc.). However, these are estimates, and actual amounts vary by lender, location, and loan program.
Here is a breakdown of the costs using common assumptions:
Down payment
This depends heavily on your loan type. Here is an example of potential down payments using the loans listed above.
20% down (conventional): 0.20 × $550,000 = $110,000
10% down: $55,000
5% down (common for many buyers): $27,500
3% down (minimum for some loans): $16,500
0% down (VA or USDA): $0
For the sake of this example, let’s consider putting 20% down, which would total $110,000.
2. Closing costs
Closing costs usually run 2–5% of the purchase price. These include lender fees, appraisal, title insurance, escrow fees, attorney fees where applicable, recording fees, etc.
Estimated: 3% of $550,000 = $16,500
3. Prepaid expenses
These are advance payments on items that will recur after closing. Based on hypothetical estimates:
Property taxes (2–6 months):
- Example: $6,000 annual taxes → $500/month → 4 months prepaid = $2,000
Homeowners insurance (1 year upfront + 2 months reserves):
- Example: $1,800 annual premium → $1,800 + $300 = $2,100
Prepaid interest: (per diem interest for remainder of month)
- Example: $550,000 home with 20% down → $440,000 loan
- Interest rate 6.5% → around $78/day → 10 days = $780
Estimated total prepaid costs = $2,000 (taxes) + $2,100 (insurance) + $780 (interest) = $4,880
4. Earnest money deposit
Typical amount: 1%–3% of home price.
Assume 2%: $550,000 × 2% = $11,000 (credited back at closing)
This isn't an extra cost, but just paid earlier.
5. Home inspection costs
Typical range: $300–$800
For this example:
Home inspection: $600
Optional radon: $150
Optional pest/termite: $125
Inspection total: $875
6. Moving and initial repair costs
Varies based on distance, complexity, and size of home. Repair costs may vary depending on the condition of the home.
- Example estimate for local move: $1,800
- Example estimate for home repair costs: $1,500
Total estimated cash needed upfront: $135,555 - $11,000 (earnest money credit) = $124,555
Ongoing costs to plan for after making a home purchase
Once you’ve closed on your new house, it’s important to budget for the recurring expenses that come with homeownership. These ongoing costs can impact your monthly cash flow and long-term financial planning. Keeping these costs in mind can help you avoid surprises and may help you better determine if you are financially ready for a home purchase.
Key ongoing homeownership costs may include:
Mortgage payments: Your monthly principal and interest based on loan amount, interest rate, and term.
Property taxes: Typically paid through your mortgage escrow account but may vary based on local tax rates and home value.
Homeowners insurance: Required by most lenders; covers damages from events like fire, theft, or certain natural disasters.
Private mortgage insurance (PMI): Applies if you put less than 20% down. PMI is usually included in your mortgage payment until you meet equity requirements.
HOA or condo fees (if applicable): Monthly dues that cover community maintenance, amenities, or building reserves.
Utilities and services: Electricity, water, gas, internet, trash collection, sewer, and other necessary services.
Maintenance and repairs: Regular upkeep such as HVAC servicing, lawn care, gutter cleaning, pest control, and unexpected repairs. A common rule of thumb is to budget 1%–3% of your home’s value annually.
Home improvements and upgrades: Optional, but likely over time, which may include painting, appliance replacements, renovations, and energy-efficiency updates.
Appliance and system replacements: Large systems (e.g., roofs, HVAC, water heaters) have life spans and will require future funds to repair or replace.
- Emergency reserve for home expenses: An additional cushion, or emergency fund, for major repairs or unexpected issues like leaks, electrical problems, or foundation concerns.
How to prepare your savings & budget for buying a house
When analyzing the average cost of buying a house and determining how much money you will need to save, the next step would be creating a savings plan to help you budget and reach your goals. Here are some steps you can take to help you prepare for your home purchase:
Set your savings goal: Once you have determined how much money you need to buy your dream house, you can use this to help you set your savings goal, whether that’s saving towards a 20% down payment or adding some extra cushion for closing costs and other expenses.
Create a budget: Make an inventory of all of your expenses to help you create a realistic budget. The 50/30/20 rule can help you get started, where 50% of your monthly salary goes towards rent, bills, and necessary expenses; 30% goes towards leisure spending and wants; and 20% goes towards debt repayment or savings.
- Use high-interest savings to help boost your cash: Utilizing high-yield savings accounts or CDs to save for a down payment can help you potentially reach your goals faster. More than half of aspiring homeowners use standard savings or checking accounts to save for a down payment, potentially missing out on further savings. Explore your options at Raisin today.
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- Hold yourself accountable: Regularly checking in on your savings and realigning your budget can help you keep your money-saving resolutions on track and show you if you need to make adjustments in your savings or spending.
If you are currently renting and looking for other ways to help you save for a house, you can turn to our page on “How to save for a house while renting.”
Bottom line
Buying a home requires preparing for both upfront and ongoing expenses, from your down payment and closing costs to insurance, taxes, maintenance, and future repairs. By estimating your required cash, comparing loan options, and building a targeted savings plan, you can set yourself up for a smoother home-buying process and long-term financial stability.
Ready to get started saving towards your homeownership goal? Raisin is here to help. The Raisin marketplace gives you access to a variety of high-yield savings products to help you get closer to your goals. Explore account types, compare rates, and sign up to start boosting your savings potential today!
FAQs on how much it costs to buy a house
How much do closing costs usually cost relative to home price?
Closing costs may vary but typically range between 2–5% of the home’s purchase price. The exact amount depends on factors such as your lender, loan type, location, and whether attorney fees or additional services (like homeowner association (HOA) fees or inspections) apply.
How much cash reserves do lenders expect when buying a house?
Requirements vary, but lenders often look for at least one to three months’ worth of mortgage payments in reserves. Jumbo loans and some conventional loans may require even more, depending on credit and financial stability, so you may want to check specific requirements.
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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
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