How much money do you need to buy a house?
Quick insights
- The money you’d need to purchase a home is usually a sum of a down payment, closing costs and upfront expenses like inspections or appraisals.
- Most homebuyers put down 3% to 20% of the purchase price, with closing costs adding about 2% to 5% more.
- Setting aside funds for additional expenses, such as moving, furniture and high-priority maintenance may help you feel more financially prepared for homeownership.
The money you need to buy a home doesn’t have a one-size-fits-all answer, but you can break it down. Knowing the upfront costs to expect can help you budget, make an offer and buy a house. Maybe you’ve searched online listings and even bookmarked your dream home. One question remains: How much money do you actually need to buy a home?
The costs of buying a home
The terms of your mortgage, including your monthly payment, depends on the house, loan terms and your financial profile. Getting preapproved may even help clarify your budget for buying a house.
There is usually upfront money due before you can get the keys to your new home and start paying the mortgage. This upfront money can be broken into several common costs.
Down payment
Your down payment, the initial money you put into the home, is a significant part of your mortgage terms. This directly influences the loan amount, the type of loan you can get and your monthly payments. While 20% is often seen as the traditional benchmark, you may be able to put less money down.
Depending on the type of mortgage you apply for, your down payment could range from 3% to 20% of the purchase price of the home. For example, on a $300,000 home, the down payment could range from $9,000 to $60,000. Some government-backed loans, such as FHA loans and VA loans, may offer lower down payment options.
Closing costs
These are one-time fees and expenses you pay when finalizing your mortgage loan at settlement. They typically range from about 2% to 5% of the home’s purchase price and vary by lender, loan type and location. Closing costs can include:
- Appraisal fee: Covers the cost of having a professional appraiser estimate the market value of your home to make sure the loan amount aligns with the property’s worth.
- Home inspection fee: Although sometimes optional, a home inspection can help assess the condition of the home before closing and can help you identify potential problems and safety concerns.
- Title search and title insurance costs: A title company reviews public records to confirm that the seller legally owns the property. Title insurance may help protect you and the loan provider against potential ownership disputes or claims.
- Lender origination and underwriting fee: The underwriting fee is charged by the loan provider for processing and reviewing your mortgage application, verifying financial information and preparing the loan documents.
- Credit report fee: The mortgage lender may request your credit report to assess your credit history and determine eligibility for the home loan. Depending on the lender, this fee could be charged to you.
- Recording fee: Paid to your local government to record the new property ownership and mortgage documents in public records.
- Attorney or settlement fees: In some states, an attorney or settlement agent oversees the closing to ensure all legal documents are accurate and properly executed. This could also apply if you decide to hire a lawyer for help with the closing, regardless of state.
- Prepaid interest: Prepaid interest covers the interest that accrues between your closing date and the start of your first mortgage payment.
- Prepaid property taxes and homeowner’s insurance: Mortgage lenders typically require you to prepay a portion of these costs at closing to cover the first few months of payments.
- Private mortgage insurance (PMI) or funding fee (for certain loans): These apply in different situations. For example, PMI is usually charged when you are putting down less than 20% of the purchase price on a conventional mortgage. When using a government-backed loan, however you might have a specific upfront cost, such as a VA funding fee.
Earnest money deposit
An earnest money deposit (typically 1% to 3% of the home’s purchase price) to show you’re committed to buying the home. Sellers may request this, or you may include it in your offer. It can be optional, so you can decide whether you want to save for it when calculating how much money you need to buy a house. The earnest money deposit typically can be applied toward closing costs or the down payment. Confirm with your mortgage lender to be sure.
Survey fee
A property survey is a professional measurement that maps out your home’s size, exact boundaries and land features. The surveyor checks where fences, driveways and neighboring structures are located to make sure nothing crosses into your property (or vice versa). This can help prevent boundary disputes later and confirms the size of the lot you’re buying matches what’s listed in public records.
Courier or wire transfer fees
These administrative charges cover the cost of securely transferring funds and documents during the closing process.
Moving costs
Beyond the immediate costs of purchasing and financing your home, don't forget to budget for the actual move itself. These expenses can vary widely but are important to factor into your overall financial plan, whether you opt for a full-service moving company, do it yourself or have new items delivered.
Ongoing homebuying costs
After closing, there are recurring costs that come with owning a home. Planning for these can help you manage your budget long-term.
- Monthly mortgage payments: Your main payment covers both principal (the loan balance) and interest. The exact amount depends on your loan size, mortgage interest rate and repayment term.
- Property taxes and homeowner’s insurance: Many mortgage lenders collect these through an escrow account and include them in your monthly payment.
- Private mortgage insurance (PMI): If your down payment is less than 20% of the purchase price, you may need to pay PMI on a conventional mortgage. This insurance helps protect the mortgage lender and can usually be removed once you build sufficient equity in your home.
- Maintenance and utilities: Homeownership comes with upkeep expenses. An example of a goal could be to set aside about 1% to 2% of your home’s value each year for home maintenance and unexpected repairs.
How to prepare to buy a house
Getting ready to purchase a home may begin long before you begin touring properties. By proactively organizing your finances and understanding lender expectations, you can help improve your chances of approval and secure favorable loan terms. Below are some ways to help you prepare for a home purchase:
- Check and improve your credit: Your credit score can influence the mortgage options and interest rates available to you. Reviewing your credit report and paying down debts may help strengthen your financial profile.
- Create a realistic budget: Estimate how much you could afford based on your income, expenses and lifestyle. Consider both upfront costs (such as your down payment and closing costs) and recurring payments (mortgage, taxes and insurance).
- Save for a down payment and emergency fund: Even with low down payment programs, setting aside extra funds can provide financial flexibility at or after closing. It may also help cover expenses, new furniture or home repairs.
- Get mortgage prequalification or preapproval: A mortgage prequalification can give you an early estimate of what you might afford, while a mortgage preapproval offers a more detailed review of your finances and may help strengthen your offer when you find a home you love. Chase does not offer mortgage prequalification.
In summary
Every homebuyer’s situation is unique, so the cost to buy a house will vary. By understanding the upfront costs, preparing for ongoing expenses and speaking with a Home Lending Advisor, you can make more informed decisions when taking that next big step toward your dream home.
