How Much Money Do You Need to Buy a House?

Getting ready to buy a house means spending more time than you might have ever spent in your life thinking about your finances. Trying to figure out whether the math works for you right now or whether you need to keep saving for another year can hurt your brain, especially when the numbers keep contradicting each other depending on which calculator or lender guideline you're referencing today.

On a median-priced home around $417,700 with 5% down, you're looking at roughly $43,000 in upfront cash, plus a cushion to keep in the bank after closing.[1] That number drops to about $24,000 on a $250,000 home with an FHA loan, and it climbs past $100,000 on a $500,000 home with 20% down. Your exact figure depends on your price point, loan type, and state.

A few things have shifted in the past few years. Mortgage rates are in the 6s, not the 3s: the 30-year fixed averaged 6.53% the week of May 28, 2026, with the 15-year fixed at 5.87%.[2] The NAR settlement took effect August 17, 2024, which changed how buyer-agent compensation is negotiated and disclosed.[3] And the first-time buyer share of the market hit a record-low 21%, with a record-high median first-time buyer age of 40.[4] The cash you need today is not the cash your older sibling needed five years ago.

The short answer: How much cash you need

Below is what cash to close looks like at the price points readers ask about most, at the down payment levels most buyers choose. The median down payment was 14.4%, or about $30,400, in Q3 2025.[5]

Assumptions: closing costs at 3% of purchase price (state range 2–5%); prepaid escrow = 6 months of property tax at the 1.1% national-average effective rate + 12 months of homeowners insurance at $2,500/year; 2-month reserve = 2 × PITI at the 6.53% 30-year fixed Freddie Mac PMMS, week of May 28, 2026. Buyer-agent compensation is not included; see the cash-to-close section below.[2]

The down payment is one line item among five. Closing costs run 2–5% of the purchase price and cover lender title insurance, lender origination, recording fees, and (in attorney states) attorney fees.[6] Owner's title insurance is extra, and can be well worth the one-time cost so you're protected from anything the title review missed.

Prepaid escrow can comprise several months of property tax plus a year of homeowners insurance; it's not the same as the property tax and insurance you'll pay monthly going forward. Lender reserves are two months of total mortgage payments, held in liquid accounts, that the lender wants to see at closing. And earnest money (1–3% of the purchase price) is upfront cash you pay when your offer is accepted; it's held in escrow during closing and applied toward your down payment at the table.[7]

Your number can land higher or lower depending on a few variables. A high-property-tax state like New Jersey, with an effective rate around 2.23%, pushes prepaid escrow up.[8] An FHA loan adds a 1.75% upfront mortgage insurance premium that's usually rolled into the loan but counts toward your total cost.[9] A VA loan with a service-connected disability waiver eliminates the funding fee entirely.[10] Gift funds, seller concessions, and state down payment assistance can drop the out-of-pocket figure substantially.

Down payment options by loan type (and whether you really need 20%)

The four main loan types differ less in down payment minimums than in what you pay alongside the principal and interest.

Conventional loans allow as little as 3% down through Fannie Mae's HomeReady program or Freddie Mac's Home Possible program, both designed for first-time and lower-income buyers.[11] [12] If you put down less than 20%, you'll pay private mortgage insurance (PMI), which costs roughly 0.46%–1.5% of your loan amount annually.[13] PMI auto-cancels when you reach 22% equity, and you can request removal at 20% equity under the federal Homeowners Protection Act.[14]

FHA loans allow 3.5% down with a 580 credit score, or 10% down with a 500–579 score. They come with two mortgage insurance charges: a 1.75% upfront premium and an annual premium of 0.55% on most loans. The annual premium stays for the life of the loan unless you refinance into a conventional loan. That distinction trips up a lot of first-time buyers, as Dell Jeanty, a realtor with Dell Residential at Samson Properties, points out: "Buyers often confuse PMI with MIP. FHA loans are popular with first-time buyers because they allow lower credit scores and down payments as low as 3.5%, but FHA Mortgage Insurance Premium (MIP) can remain in effect for the life of the loan unless the buyer refinances. Conventional PMI, on the other hand, can be removed once the homeowner reaches enough equity."

VA loans require 0% down for eligible veterans and active-duty service members, with no monthly mortgage insurance. The trade-off is the VA funding fee: 2.15% of the loan for first-time use with less than 5% down, 3.30% for subsequent use under 5% down, 1.50% at 5–9.99% down, and 1.25% at 10% or more.[10] The fee is waived entirely for veterans with a service-connected disability rating and for surviving spouses receiving Dependency and Indemnity Compensation.

USDA loans are 0%-down loans for buyers in designated rural areas, capped at income limits that vary by county.[15]  The eligibility map covers a large share of the country geographically, so many small-town and exurban addresses qualify.[16] There's an upfront guarantee fee of 1% and an annual fee of 0.35% of the loan balance.

The 20% myth: Why waiting often costs more than PMI

The "you need 20% down" suggestion gets repeated ad nauseam, especially in the form of well-meaning advice from parents who bought their home more than 20 years ago. The case for 20% is real: no PMI, a smaller loan, a lower monthly payment. But the math on getting there is often worse than the math on starting with less.

Take a Raleigh buyer that Ryan Fitzgerald, owner of Raleigh Realty, worked with recently. She was pre-approved on a $375,000 home with 5% down, putting $18,750 toward the purchase. She wanted to wait 2.5 years to save the additional $56,250 needed to hit 20%. Raleigh prices were appreciating 4–5% annually at the time, which meant the same home would have run $410,000–$415,000 by the time she had her 20% saved. Her PMI at 5% down was $185 per month.

To break even on what waiting would have cost her in higher home prices, she would have needed to pay PMI for more than 16 years. She bought with 5% down, refinanced two years later when her home's appreciation pushed her past 20% equity, and dropped the PMI.

Fitzgerald's working dollar rule for PMI: "PMI costs about 0.5%–1% of your loan each year, or an estimated cost of $150–$300 per month for a $350K loan with 5% down."

PMI also doesn't last forever, even though that's a common belief. Fitzgerald adds: "You can request to have PMI removed once you reach 20% equity in your home (based on appreciation, principal paydowns, or both). Most homeowners who bought homes in markets with appreciation will remove their PMI within 5 to 7 years of their purchase."

The pattern shows up across regions. Jeanty has worked with buyers who waited years to save 20%, only to watch home prices rise far more than the PMI they were trying to avoid: "The buyer ended up paying well over $100,000 more for a similar home after waiting, which made the original PMI concern look relatively minor in hindsight."

Cash to close: What you pay beyond the down payment

Your down payment is one of five things you'll write checks for between accepting an offer and getting the keys.

• Earnest money: 1–3% of the purchase price.[7] Held in escrow once your offer is accepted, applied toward your down payment or closing costs at the table, or refunded if you cancel within a valid contingency window.
• Home inspection: $300–500.[17] This is paid directly to your inspector and separate from any lender requirement.
• Appraisal: $400–700 typical. Lenders require appraisals to confirm the property's value. Some lenders fold this into closing costs, others bill it separately when you go under contract, and sometimes you pay the appraiser directly.
• Closing costs: 2–5% of the purchase price. The national closing cost average was $4,661 in April 2025.[6] State-by-state averages vary widely; CoreLogic's ClosingCorp tracks them.[18] Closing costs include lender title insurance, lender origination, recording fees, transfer taxes, and (in attorney states) attorney fees.
• Prepaid escrow: typically 6 months of property tax + 12 months of insurance. Your lender collects this at closing to seed your escrow account.
• Buyer-agent compensation. If you work with a Clever Partner Agent, you may qualify for a home buyer rebate that offsets these closing costs.

After the NAR settlement: Is buyer-agent compensation now a buyer cost?

On August 17, 2024, the National Association of Realtors' nationwide settlement took effect.[3] Two things changed: buyer-agent compensation is no longer published on the multiple listing service (MLS), and buyers must sign a written buyer-broker agreement before touring a home with that agent. The compensation amount itself is negotiated between you and your agent.

What didn't change: buyer-agent compensation is still negotiable (it always was), and sellers are still mostly covering it as a concession on their listing. "The August 2024 NAR settlement did not change the commission structure," Jeanty notes. "What changed is that we as agents can display on the multiple listing service. The commission has always been negotiable."

His brokerage's data backs that up. Samson Properties' Cardinal Title Group tracked 212 contracts in Virginia, Maryland, DC, and West Virginia from April 7–13, 2026: 97% included buyer-agent compensation, 81% offered 3% or more, and only a small share came in at 2.5% or below.

Clever's own 2026 commission survey of 533 agents nationwide shows the same pattern. The average total commission has rebounded to 5.70% from a 2024 low of 5.32%, and the average buyer-agent commission is now 2.82%.[19] Redfin's data center shows buyer-agent commissions ticked up from 2.36% in Q3 2024 to 2.43% in Q3 2025 on its own sample, a different methodology pointing the same direction.[20]

In most deals, the seller is still covering your agent's commission, so it doesn't hit your closing statement. In the smaller share of deals where the seller declines to cover it, you either pay it at closing or roll it into your offer price (subject to the appraisal coming in high enough to support it). Plan for up to 2.82% as a worst-case buyer-cash item; in practice, most buyers won't pay it directly.

How much income you need (and why pre-approval isn't the goal)

Lenders evaluate your loan application against two debt-to-income (DTI) ratios. Front-end DTI compares your projected housing payment (principal, interest, taxes, and insurance, or PITI) to your gross monthly income; the traditional benchmark is 28% or less. Back-end DTI compares all your monthly debt obligations (housing plus car loans, student loans, credit card minimums, child support) to gross monthly income; the traditional benchmark is 36% or less. Most lenders cap back-end DTI at 43% under the CFPB's Ability-to-Repay/Qualified Mortgage rule.[21] FHA and some non-QM lenders go higher, up to 50% in some cases.

Here's a worked PITI example at the current interest rate. Buy a $400,000 home with 5% down ($20,000), finance $380,000 on a 30-year fixed at 6.53%, and your monthly principal and interest is about $2,409. Add property tax at the national-average effective rate of about 1.1% ($367/month), homeowners insurance at the national average of about $2,500/year ($208/month), and PMI in the middle of Fitzgerald's range (~$238/month). Total PITI: roughly $3,222/month. Working backward from a 28% front-end DTI, you'd need a gross income of about $138,100 to hit that target on a $400,000 home with 5% down. You can stress-test your own numbers with the Clever home affordability calculator.

The lender will probably approve you for less income than that on paper because most lenders use the 43% back-end cap. But "the lender will approve you" isn't the question. The question is what you can pay every month and still have a life.

Here are sample incomes at the 28% benchmark by price tier (5% down up to $400K, 10% down at $500K, 20% at $700K; national-average tax and insurance; no HOA):

• $250,000 home: PITI ~$2,090/mo, income needed ~$89,650
• $300,000 home: PITI ~$2,470/mo, income needed ~$105,800
• $400,000 home: PITI ~$3,220/mo, income needed ~$138,100
• $500,000 home: PITI ~$3,705/mo, income needed ~$158,900
• $700,000 home: PITI ~$4,400/mo, income needed ~$188,600

These are starting benchmarks, not ceilings. Lenders will go higher; whether you should is a different question, and one Fitzgerald has strong field experience with:

"Most lenders will pre-approve you for the maximum amount you can afford based on your debt-to-income ratio… Being pre-approved for the maximum means you should not spend the maximum. From my experience, approximately 80% of the time, the dollar amount approved for a borrower to purchase their new home does not accurately reflect what the borrower should actually spend. For example, most borrowers receive an approved mortgage for 15–25% more than they feel comfortable spending."

Treat your pre-approval as your ceiling, not your target.

How much to keep in the bank after you close

Your lender has a number in mind for your post-closing reserves: usually two months of PITI, held in liquid accounts, verified by bank statements.[22] On the $400,000 example above, that's about $6,450. Hit that and you'll satisfy underwriting.

But the number you should be thinking about is bigger. A realistic post-close cushion is 3–6 months of total living expenses (not just PITI) plus a $10,000–$20,000 buffer for the home itself. The reason that second number exists isn't paranoia; it's the first-year surprises:

• Property tax reassessment after sale. Most states reassess property values based on the recent sale price; your year-two tax bill (and escrow shortage) can jump meaningfully in markets that have appreciated since the last full assessment.[23] California's Proposition 13 limits this, but most states don't have an equivalent cap.
• Insurance renewal increases. Premiums in Florida, the Gulf Coast, and increasingly the wildfire West can jump 10–30% at first renewal as you exit any introductory underwriting discount.[24]
• Major systems failures the inspection didn't catch. HVAC units, water heaters, and roofs tend to fail on a different timeline than the inspection report can predict.
• Setup costs. Utility deposits, immediate repairs flagged by the inspector, basic furniture for empty rooms, and lawn or yard equipment.

Fitzgerald sees this play out in his client follow-up calls. "Clients who abide by their comfort level will have funds for furniture, home upkeep, and their lives after closing," he says. "On the contrary, when clients stretch their dollar to the maximum amount that the lender approves, I receive calls 6 months later from them, stressed over money and questioning their purchase decision."

The ongoing costs of owning the house

Once you're in, your monthly cost is more than PITI. Build these into your budget before you close, not after:

• Property tax. The national effective rate is around 1.1% of home value annually; New Jersey has the highest rates at about 2.23%, Hawaii the lowest at about 0.27%.[8] Verify your county's rate, not just your state average.
• Homeowners insurance. The national average is around $2,500/year, but the spread is enormous: Florida often runs $5,000+, while Vermont and other Northeast states often land between $1,000 and $1,300.[24]
• Maintenance. A common benchmark is 1–4% of home value per year, which spreads unevenly across years and tends to spike when a major system gives out. Harvard's Joint Center for Housing Studies tracks national remodeling and upkeep spending annually.[25]
• HOA fees (if your home has them). These fees average around $200–$300/month, but high-amenity buildings and resort communities can run much higher.[26]
• Utilities. The average household pays around $430/month across the country (U.S. Energy Information Administration Residential Energy Consumption Survey).[27] [28]

Carrying the $400,000 example forward: monthly PITI around $3,222, plus $200 HOA (if applicable), plus $430 in utilities, plus $333–$1,333 going into a maintenance reserve (the 1–4% range), gets you to an all-in monthly comfort number of about $4,185–$5,185 on a median-area home.

First-time buyer programs and down payment assistance

One big frustration for first-time buyers is hearing that "down payment assistance exists" but failing to get anyone to name programs they can google. Use the directories below to see what you might qualify for in your area.

• Start with HUD's state-by-state directory. hud.gov/topics/buying_a_home and the HUD State Information page point you to the State Housing Finance Agency (HFA) in your state, which is where the deepest assistance stacks live. The National Council of State Housing Agencies maintains a directory of all 50 HFAs.
• Book a free HUD-certified housing counselor session. Counselors are independent of any lender, brokerage, or sales pitch. You can get up to one hour of counseling at no cost. If you're unsure about anything involving the cost of buying a house, this is a fantastic option.
• Check loan-type-specific programs. The USDA's eligibility map is the entry point for rural-area buyers. The VA's housing assistance page covers eligibility and the Certificate of Eligibility. Fannie Mae's HomeReady and Freddie Mac's Home Possible are conventional 3%-down options.[11] [12]

Most state HFAs offer grants or forgivable loans that can stack on top of FHA, VA, or USDA loans. Eligibility is usually tied to income limits (often 80–120% of area median income) and a first-time buyer definition that typically means you haven't owned a primary residence in the last three years.

Are you ready to buy? A pre-purchase readiness checklist

Use this as a one-page sanity check before you start touring homes.

• Pull your credit report. Get it for free at annualcreditreport.com. Knowing your FICO before you talk to a lender keeps you from being surprised.
• Calculate your DTI. Add up all monthly debt payments plus a projected PITI; divide by gross monthly income. Target 43% back-end or less.
• Get pre-approved with at least 2–3 lenders. Rates, fees, and underwriting flexibility vary; compare Loan Estimates side by side. If you do all your shopping within a 14-day window, the credit bureaus count it as a single inquiry.
• Research your state DPA programs. Start at HUD's State Information page and your state HFA via NCSHA.[29] [30]
• Schedule a HUD-certified housing counselor session. These are free, confidential, and they don't have any reason to direct you to a specific lender or brokerage beyond helping you find the best deal or program for you.
• Build your reserve target. The lender minimum is two months of PITI; your real-life target is 3–6 months of total living expenses plus a $10,000–$20,000 repair buffer.
• Find a first-time-buyer-friendly agent. Ask about their last three first-time-buyer closings before you sign a buyer-broker agreement.

Want to know how much you may be able to afford? Best Interest can get you pre-approved quickly.

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