If you have ever asked yourself, how much money do you need to buy a house, you are not alone. For most first-time homebuyers, the biggest barrier is not the dream of owning a home. It is the uncertainty around the numbers.
You might have heard you need 20 percent down. Or that you need perfect credit. Or that buying is only for people with massive savings. The truth is more encouraging than most people realize.
In this guide, we will break down the real costs involved, walk through the home buying process step by step, and explain how to strategically prepare to buy your first home with clarity of mind.
The Big Picture: What You Are Actually Paying For
Buying a home involves more than just the down payment. When budgeting, it helps to think in layers. There are upfront costs, ongoing costs, and the financial preparation that happens before you ever tour a property.
Most first-time homebuyers encounter four primary upfront expenses: the down payment, closing costs, earnest money, and moving costs. Each one serves a different purpose in the transaction.
| Cost Category | What It Covers | Typical Range |
|---|---|---|
| Down Payment | Portion of the home price paid upfront | 3% to 20% |
| Closing Costs | Lender fees, appraisal, title, escrow | 2% to 5% |
| Earnest Money | Good faith deposit toward purchase | 1% to 3% |
| Moving Costs & Setup | Movers, utilities, minor updates | Varies |
If you are purchasing a $400,000 home, your total upfront cash needed could range from roughly $20,000 to $40,000 depending on your loan type and negotiations. That range surprises many buyers because it is often much lower than expected. Use our mortgage calculator to run your own numbers before your first lender conversation.
The Down Payment: The Most Misunderstood Number
The down payment gets the most attention, but it is also the most widely misunderstood part of buying a home.
You do not automatically need 20 percent down. Many modern mortgage loan programs are designed specifically for first-time homebuyers and require significantly less upfront. The right minimum down payment depends on which loan program fits your financial profile.
For example, a conventional loan backed by Fannie Mae may allow as little as 3 percent down for buyers with strong credit scores. An FHA loan typically requires just 3.5 percent down and tends to be more flexible with credit score requirements, making it a popular choice for buyers with moderate credit or limited savings. A VA loan, available to eligible veterans and active service members, may offer a zero down payment option — one of the most powerful benefits in mortgage lending. A USDA loan serves buyers in eligible rural and suburban areas and also allows for zero down payment.
On a $400,000 home, 3 percent down equals $12,000. A 3.5 percent FHA loan down payment equals $14,000. Five percent comes to $20,000. In contrast, the traditional 20 percent would require $80,000 upfront.
The right number depends on your financial profile and long-term goals. A smaller down payment lets you enter the market sooner. A larger one reduces your monthly mortgage payment and may eliminate private mortgage insurance — a lender-required premium that applies to most conventional loans when your down payment is less than 20 percent of the purchase price. There is no universal answer. There is only the strategy that works best for you.
Closing Costs: The Expense Buyers Forget to Plan For
Closing costs are often the hidden surprise in the home buying process and a critical piece of answering how much money do you need to buy a house.
These costs typically range between 2 and 5 percent of the purchase price and cover lender origination fees, home inspection, appraisal, title services, escrow coordination, prepaid property taxes, and homeowners insurance setup. On a $400,000 purchase, that may translate to $8,000 to $20,000.
| Closing Cost Item | What It Covers | Typical Cost |
|---|---|---|
| Origination Fee | Mortgage lender processing and underwriting | 0.5%–1% of loan amount |
| Appraisal | Confirms home price reflects market value | $400–$700 |
| Title Insurance | Protects lender and buyer against ownership disputes | Varies by state |
| Prepaid Property Tax | Months of property taxes collected upfront | Depends on local property tax rate |
| Homeowners Insurance | First year’s premium paid at closing | $1,000–$2,500 |
| Escrow Setup | Account to manage ongoing property taxes and insurance | Varies |
Many buyers do not realize that seller concessions can sometimes offset a portion of these housing costs. Negotiation strategy matters, especially in balanced markets. Working with the right mortgage lender can help you structure your offer in a way that minimizes upfront strain. Learn more about why working with a broker makes a difference here.
Understanding Your Monthly Payment
While the upfront numbers matter, long-term affordability comes down to your monthly mortgage payment. Shifting focus from the purchase price to monthly payment comfort makes the question far more practical and less intimidating.
Your total housing payment generally includes principal and interest on the loan, property taxes, homeowners insurance, and possibly mortgage insurance depending on your down payment. If the property has a homeowners association, HOA fees are added as well. Your interest rate plays a major role here — even a small shift in mortgage rates can add or subtract hundreds of dollars from your monthly payment on the same loan amount.
Mortgage lenders evaluate affordability using debt-to-income ratios. A common guideline is keeping your housing payment between 28 and 31 percent of your gross monthly income.
For example, if your household earns $7,000 per month before taxes, a comfortable monthly mortgage payment may fall between approximately $1,960 and $2,170. Reducing monthly debt — like credit card balances or auto loans — before applying is one of the most effective ways to qualify for a higher loan amount or a better mortgage rate.
How Loan Programs Impact Your Cash Needed
Different home loans significantly affect how much cash you need upfront and what your ongoing costs look like over time.
| Loan Type | Typical Down Payment | Mortgage Insurance | Often Best For |
|---|---|---|---|
| Conventional Loan | 3%–20% | PMI if under 20% down | Buyers with strong credit scores |
| FHA Loan | 3.5% | Required (upfront + annual) | Buyers with moderate credit or limited savings |
| VA Loan | 0% | Not required | Eligible veterans and active service members |
| USDA Loan | 0% | Required (lower cost) | Buyers in eligible rural or suburban areas |
Private mortgage insurance on a conventional loan typically costs 0.5 to 1.5 percent of the loan amount annually. On a $350,000 loan, that could add $145 to $438 to your monthly payment. The good news is that once you reach 20 percent equity in your home, you can request its removal — unlike FHA mortgage insurance, which often remains for the life of the loan.
The goal is not simply to qualify for a mortgage. It is to align your mortgage loan with your long-term financial comfort and stability. If you are exploring homes or want to understand your local real estate market, visit our real estate resources page.
How to Prepare to Buy Your First Home with Confidence
Preparation transforms uncertainty into clarity. If you want to prepare to buy your first home strategically, start with these foundational steps:
- Review your credit score and address any errors or high credit card balances
- Calculate your monthly debt and understand your debt-to-income ratio
- Build a dedicated savings plan for your down payment and closing costs
- Avoid opening new credit lines before applying for a mortgage loan
- Speak with a mortgage professional early to create a custom plan
You do not need everything perfectly aligned before reaching out. Many first-time homebuyers benefit from guidance six to twelve months before purchasing. Use our mortgage calculator to get a head start on your numbers before that first conversation.
A Realistic First-Time Buyer Example
Consider a buyer purchasing a $350,000 home using an FHA loan with the minimum down payment.
The down payment would be $12,250. Estimated closing costs at 3 percent of the purchase price come to about $10,500. That brings the total estimated cash needed to approximately $22,750 before any negotiations or seller concessions.
On the monthly side, at a 7 percent interest rate the principal and interest payment on a $337,750 loan amount would be approximately $2,249. Add property taxes, homeowners insurance, and FHA mortgage insurance and the total monthly mortgage payment could land around $2,750 to $2,900 depending on location.
Many first-time homebuyers assume they need $60,000 or $70,000 saved before buying. In reality, strategic planning may make homeownership achievable with far less. That is why asking how much money do you need to buy a house is the right first step. The real answer comes from personalization.
Clarity Over Guesswork
The biggest mistake first-time homebuyers make is assuming they cannot afford to buy without actually reviewing their options.
The answer to how much money do you need to buy a house depends on your credit score, chosen loan program, purchase price, mortgage rate, and financial goals. It is not a one-size-fits-all number.
When you replace guesswork with strategy, the path forward becomes much clearer.
Ready to Create a Plan?
Online tools are helpful, but they cannot account for your unique financial picture. Use our mortgage calculator to start running the numbers, then take the next step with a real conversation.
If you are serious about buying and want to prepare to buy your first home with confidence, the next step is a customized strategy conversation.
At White Pine Funding, we help first-time buyers navigate the entire home buying process with education, transparency, and personalized guidance.
Stop wondering and start planning.
FAQs
Do I need perfect credit to buy my first home?
No. While higher credit scores can improve your mortgage rate and loan terms, many programs — including FHA loans and VA loans — are designed specifically for buyers with moderate credit profiles. A credit score of 580 or above qualifies for an FHA loan with the standard 3.5 percent minimum down payment.
How much should I save before starting the home buying process?
A strong starting point is your estimated down payment plus 2 to 5 percent of the purchase price for closing costs. Our mortgage calculator can help you build a personalized estimate, and a consultation with a mortgage lender will sharpen it further.
Is it better to wait until I have 20 percent down?
Not necessarily. In the Salt Lake City market, waiting for a 20 percent down payment on a median home price could mean sitting on the sidelines for years. Waiting can also mean missing real estate appreciation. The better question is whether your monthly mortgage payment fits comfortably within your budget over the long term.
What ongoing costs should I budget for after closing?
Beyond your mortgage payment, expect property taxes, homeowners insurance, maintenance (budget roughly 1 percent of the home price annually), HOA fees if applicable, and utilities. Building a complete picture of your total housing costs is essential for sustainable homeownership.