How Much Money Do You Need to Buy a House?

The average homebuyer in the United States will need anywhere from $21,900 to $87,600 to buy a median-priced house of $438,000. That’s about 5-20% of the home’s purchase price upfront and doesn't include ongoing maintenance, taxes, and utility costs, which we'll cover more below.

However, how much money you need to buy a house varies drastically depending on your home price, location, and loan type. High-cost areas, such as Los Angeles and New York City, will require much higher amounts, while lower-cost cities, like Detroit or Pittsburgh, have much lower homeownership costs.

To understand how much money you really need to buy a house, we’ll break down your upfront costs, look at how much of a downpayment you really need, and cover some of the other costs and expenses that come up when you’re buying a house.

How much money do you have to pay upfront when buying a house?

Figuring out your upfront costs is an essential step to add to your home buying checklist. If you’re buying a $438,000 home, your upfront costs will typically look like this:

Down payment (3-20%): Your down payment will be your biggest expense and it usually ranges from 3-30% of the purchase price, or $13,140-$87,600 with a $438,000 home. According to the National Association of Realtors (NAR), the average down payment is 14.4%, which would be around $63,000.[1]

Closing costs (2-5%): Your closing costs will typically range from 2-5%, which on a median-priced home is about $8,760-$21,900. Closing costs can include items like loan origination fees, appraisals, title insurance, home inspections, and real estate agent commission.

Moving costs: These can vary substantially depending on how far away you’re moving, how many items you have, and whether or not you hire professional movers. For a local move, expect to pay anywhere from $240 to $2,000. Long-distance moves will cost between $2,000 and $8,000 on average.[2]

How much should your down payment be?

While you may think you need a down payment of 20%, the truth is that down payments can be as low as 3% for conventional mortgages or 0% for some government-backed home loans. That said, your biggest upfront cost will still typically be your down payment. 

Here’s what to keep in mind when deciding how much money to put down on a new house.

20% down (Conventional)

Best for: Buyers with plenty of savings who want to minimize their monthly housing expenses

A 20% down payment is a great option if you can afford it. Once you hit the 20% threshold, you’re no longer required to buy private mortgage insurance (PMI), which would otherwise add around 0.5-1.5% to your loan per year. Plus, a larger down payment makes you lower risk, which usually means lenders are willing to offer lower rates and more favorable terms.

But the downside is that saving up 20% isn’t feasible for everyone. In San Jose, CA, for example, the median home price is $1.7 million, which would mean you’d need $340,000 for a 20% down payment. Plus, if house prices are rising faster than your income, trying to chase a 20% down payment could end up costing you more since you’ll be paying a higher price for your house by the time you save 20%.

10% down (Conventional)

Best for: Those who want to get on the property ladder a bit sooner and are willing to pay somewhat higher monthly costs to do so

A 10% down payment is a more realistic goal for more buyers who still want a conventional mortgage but don’t want to wait indefinitely before they reach 20% down. For example, on a median house priced at $438,000, a 10% down payment would be $43,800 — certainly a substantial amount but doable for a home buyer making a $65,000 salary.

However, because your down payment will be under 20%, you’ll need to pay for PMI. That could add around 0.5-1.5% to your annual home loan costs. Also, you may have to pay slightly higher interest rates, which will further increase your monthly costs. You can refinance down the line once you reach 20% equity to remove your private mortgage insurance. Just keep in mind that refinancing comes with costs as well.

3-5% down (FHA/Conventional)

Best for: First-time buyers with limited savings or buyers with low credit scores

A 3-5% down payment is usually as low as you can go for a conventional mortgage and only if you qualify for certain programs and loans. This is a good option if you want to get on the property ladder sooner but you have limited savings. However, your monthly mortgage payments will be higher and you may not qualify to put down such a low down payment on a conventional mortgage.

An FHA loan is another low down payment option, primarily for first-time homebuyers and buyers with low credit. With an FHA loan, you can qualify with a 3.5% down payment and a credit rating as low as 580 (or 500 if you put 10% down). However, you’ll need to pay a mortgage insurance premium, usually of around 0.55%.

0% Down (VA/USDA)

Best for: Eligible homebuyers, such as veterans, military members, and rural homeowners.

VA and USDA loans are among the only zero down payment options for mortgages. VA loans also have no PMI requirement, which further saves on cost. USDA loans are available for rural and even many suburban properties.

The drawback is that not everyone qualifies. VA loans are only for veterans, active military members, and their spouses. USDA loans are limited to eligible areas, making them unsuitable for buyers in major cities.

Hidden costs of smaller down payments

When deciding how much money you need to buy a house, it can be tempting to opt for a smaller down payment. There are certainly benefits to a small down payment. You’ll be able to afford a house sooner and, depending on the current market, you could potentially lock in a lower interest rate.

However, smaller down payments have hidden costs that can build over time. You need to be aware of these hidden costs to make sure the upfront savings make sense long term.

Private mortgage insurance (PMI)

PMI is required for most mortgages with a down payment under 20% and it costs around 0.5-1.5% of the loan amount annually. On a $300,000 mortgage with 1% PMI, that means you’ll be paying $250 per month extra.

You’ll need to keep paying PMI until your home loan balance reaches 80% of your home value, at which point you can request it be canceled. Otherwise, PMI is automatically canceled when your loan balance reaches 78% of your home’s value.

So, if you take 10 years to reach 80%, that 1% PMI on your $300,000 mortgage will have cost you $30,000 in total.

FHA Mortgage Insurance Premium (MIP)

While FHA loans don’t require PMI, they do have something similar called a mortgage insurance premium (MIP). In some cases, MIP can actually be even more costly than PMI.

MIP will cost you 1.75% of the loan amount as an upfront premium, plus you’ll have to pay an annual premium of 0.15-0.75% depending on the loan terms, with most paying 0.55%. If your down payment is less than 10%, MIP lasts for the life of the loan. If it’s over 10%, MIP ends after 11 years.

So on a $438,000 mortgage with 3.5% down, you’d spend $7,394 as an upfront premium and then around $250-$300 per month for the entire life of the loan.

Higher interest rates

A smaller down payment will also lead to higher interest rates since the lender is taking on more of the risk of the mortgage themselves. While the increase in rates may not look like much at first — generally less than a percentage point — over time they make a big difference.

For example, on a $438,000 mortgage, a 5.5% interest rate will cost you nearly $40,000 more over 30 years than a 5% rate. Even worse, because your down payment is smaller, you’ll already be paying larger monthly sums on top of the higher interest.

How much money do you need for homeownership costs?

Based on our research, homeownership costs amount to around $13,000 per year — or a little over $1,000 per month — so you don’t want to spend all of your money on a down payment and closing costs. Some homeownership expenses you’ll have to start paying soon after you purchase your new property, meaning you’ll need cash on hand.

Property taxes

Property taxes vary substantially based on location, but on average cost 1.12% each month. Property taxes are determined at the state and local level, so you’ll need to do some research to find out what you’ll pay where you’re moving to.

The differences can be extreme. For example, in Alabama, the annual property tax on a median-priced house will set you back $1,044 on average. However, in New Jersey, property taxes cost an average of $9,717 per year.

Homeowners insurance

Homeowners insurance varies substantially depending on where you live and the type of property you’re buying. Coastal areas and locations prone to natural disasters tend to have the highest premiums.

For example, home insurance in Florida costs $7,392 per year, which is over six times as much as the average $1,228 in Vermont. That’s despite both states having similar median house values.

Age is also an important factor. A 100-year old house will cost you, on average, nearly $850 more per year to insure.

HOA fees

HOA fees are typically around $200 to $300 per month, although they can be much higher in some communities.[3] At $300 per month, you’ll be spending an extra $3,600 per year. Generally, the more amenities offered, the more you’ll have to pay in HOA fees.

Maintenance and repairs

The average annual maintenance cost of a single-family home is just over $6,400 or about $530 per month.[4] This expense can come as a shock if you previously rented and had a landlord cover your maintenance expenses.

Many of these costs appear as large one-time payments, especially during the first few months in your new house when you may need to invest in new appliances or repairs. For example, a new fridge or stove can easily set you back thousands of dollars.

Utilities

You should prepare to spend around $200-$400 per month on utilities, such as electricity, heating, water, internet, cable, and trash. Again, your utility amount will vary substantially depending on the size of your home and where you live. If you’re buying in an extreme climate, expect to pay a premium for heating or cooling.

Got the money to buy a house? Here’s what’s next

If you feel prepared to cover these costs to buy a house, then the next step is to find the right agent to get on your team. A good real estate agent will not only help you get the best deal on a house but they’ll also help you navigate financing, inspections, and negotiations to ensure all your hard-earned money goes to work for you. Clever is a great place to start looking for an agent. We match thousands of people with agents every year and have over 3,700 five-star Trustpilot reviews. Plus, when you buy with Clever, you can qualify for up to $500 cash back. Get started with Clever by filling out this quick form.