The amount of money you need to buy a house depends mainly on the purchase price, the type of mortgage loan you choose, and your financial situation. Here are the key factors:
Down Payment
- The down payment is the upfront cash you pay toward the home's purchase price. It typically ranges from 3% to 20% or more of the home's price.
- For conventional loans , the minimum down payment is often 3% , but putting down 20% or more helps you avoid private mortgage insurance (PMI) and may get you a better mortgage rate.
- FHA loans require a minimum down payment of 3.5% , but you must have a credit score of at least 580 to qualify for this rate. If your credit score is between 500 and 579, the down payment requirement rises to 10%.
- VA loans (for veterans) and USDA loans (for rural homes) often require no down payment.
- For higher-priced or jumbo loans, down payments can be 10% to 25% or more depending on credit and loan specifics
Additional Costs
Besides the down payment, you should budget for:
- Closing costs , usually about 3% to 6% of the loan amount.
- Earnest money deposit , typically 1% to 2% of the purchase price.
- Moving costs , which can vary widely.
- Ongoing costs like homeowners insurance and property taxes
Example Calculation
For a $300,000 house:
- Down payment could range from $9,000 (3%) to $60,000 (20%), depending on loan type.
- Closing costs might add another $9,000 to $18,000 (3% to 6% of loan).
- Earnest money might be $3,000 to $6,000 (1% to 2%).
- Total upfront cash needed could therefore be roughly $21,000 to $84,000 or more
Income and Savings Considerations
- Experts recommend spending no more than 28% of your gross monthly income on housing.
- Realistically, to afford a median-priced home (around $400,000+), you might need an annual income of around $60,000 and savings of $20,000 or more to cover down payment and other upfront costs
In summary: To buy a house, you generally need enough money for a down payment (3% to 20%+ of the home price depending on loan type), plus closing costs and other fees. For a median-priced home in the U.S., this could mean saving tens of thousands of dollars upfront, along with sufficient income to qualify for a mortgage
