Buying a home is one of the biggest financial decisions you’ll ever make, and it’s not just about the sale price. From the down payment to closing costs, there are a lot of expenses to consider. So, how much money do you really need to buy a house? Whether you’re buying a house in Seattle or a home in Denver – this Redfin guide will break down every major cost to help you budget effectively and avoid surprises.
How much money do you need to buy a house?
When purchasing a home, you’ll need to budget for more than just the down payment. Here are the key expenses:
- Earnest money deposit
- Down payment
- Closing costs
- Prepaid costs (taxes, insurance, interest)
- Moving costs
- Mortgage payments
- Mortgage insurance (if applicable)
- HOA fees (if applicable)
We’ll use the median U.S. home price—about $420,000—as a benchmark for estimating these costs.
Earnest money deposit
Earnest money is paid after a seller accepts your offer on a house. Buyers pay this amount prior to closing on a home. The purpose of paying the earnest money deposit is to assure the seller that you are acting in good faith as a buyer. The money serves as a form of compensation if you end up backing out of the deal without a valid reason. It typically ranges from 1% to 3% of the home price. For a $420,000 home, expect to pay $4,200 to $12,600. This amount is usually applied toward your down payment or closing costs.
Down payment
Your down payment is a percentage of the home price paid upfront. While some loans allow down payments as low as 3-5%, many buyers aim for 20% to avoid private mortgage insurance (PMI). Based on a 15% median down payment, here’s what that looks like:
- 3% down: $12,600
- 5% down: $21,000
- 10% down: $42,000
- 15% down: $63,000
- 20% down: $84,000 (avoids PMI)
A higher down payment can reduce your monthly mortgage and total interest paid over time.
Closing costs
Costs associated with the purchase and sale of a home like taxes, title insurance, and…