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How much money do you need to buy a house?

Decide whether you can afford to buy a home

How much money you need to buy a house is different for each person and depends on many factors. We think it’s useful to think about how much money you need in two ways.

The first is the amount of money you need to make a down payment and pay the closing costs when you buy the house. The second is the amount of money you’ll need each month to pay your mortgage bill and other home expenses. Let’s talk about both and start with the biggest factor of all!

The price of the house itself

The most important factor that decides how much money you need to buy a house is the price of the house itself. Generally speaking, you’ll need more money to buy a house that costs $500,000 than a house that costs $250,000. That’s because many costs that come with buying a house are tied to the price of the home.

For example, when a loan has a minimum down payment requirement, that requirement is usually defined as a percentage of the home’s price. If your lender requires you to make a minimum down payment of 10%, then you will need to make a $25,000 down payment to buy a $250,000 house and a $50,000 down payment to buy a $500,000 house.

In many ways, the right question to ask is "how much can you afford?" when you want to buy a house. We can help you answer that question. Check out our mortgage affordability calculator.

Also, think about getting prequalified for a mortgage with us. Prequalification can help you understand how much you can afford and give you more confidence when you start shopping for homes. Learn more about how to get prequalified for a mortgage.

Down payment

The price of the house has a big impact on how much money you need for a down payment. The kind of mortgage you get can have a big impact too.

If you qualify for a VA loan or a USDA loan, you may be able to buy a house with a 0% down payment. These loans have restrictions however. Only veterans, active duty military personnel, and surviving spouses who qualify can buy a house with a VA loan. Anyone can qualify for a USDA loan but you can only use USDA loans to buy houses in rural and some suburban communities.

You may be able to buy a house with an FHA loan with a down payment as low as 3.5% of the price of the home. Conventional loans typically have higher down payment requirements. Read more on the minimum down payments for different types of loans.

Closing costs

You will most likely need money to pay closing costs when you buy a house. How much money you need depends on factors including the price of the house, the kind of loan you have, the state where you live, and the lender you choose. Learn more about closing costs.

Many homebuyers will need to pay closing costs equal to between 3% and 6% of the price of the home. For a $250,000 home that means your closing costs might be between $7,500 and $15,000. When you apply for a mortgage with us, we’ll give you an estimate of your closing costs before we begin our formal review of your application.

Sometimes it’s possible to add some closing costs to your mortgage balance, so you don’t have to pay them in cash at closing. Certain closing costs may be tax deductible too. Consult a tax professional about whether you can deduct closing costs from your taxes.

Monthly mortgage payments

The next factor to consider before buying a house is how much money you’re comfortable paying each month towards your mortgage. Your monthly payment includes money to pay your principal balance, taxes, homeowner’s insurance, and sometimes mortgage insurance. You monthly bill also includes an interest payment and the mortgage rate you get on your loan will have a big impact on how much money you need. Our mortgage payment calculator can help estimate your monthly costs.

Other housing expenses

Don’t forget buying a house usually comes with moving expenses, utility bills, and the costs of planned and unplanned home repairs. It’s a good idea to leave money in an emergency fund for unexpected expenses.

Last reviewed and updated May 2023 by Freedom Mortgage Corporation.

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