How much money do you need to buy a house?

Buying a home is one of life's biggest financial decisions, and it's understandable to feel uncertain about how much you need to save. There’s no standard answer. What you'll need to afford a home depends on your unique situation, including your income, credit history, savings, loan options, and the housing market where you want to live.

This guide walks you through the essential factors so you can build confidence in your savings plan and understand what to expect both before and after you close on your home.

What impacts how much you need to afford to buy a house

Your ability to afford a home depends on many factors related to your finances, credit, and choice of location. Many of these factors will be something you have some control over, while others, including many ongoing expenses, are harder to influence.

We’ll discuss some of the key factors.

Your monthly income

Your monthly income plays a big role in your budget to buy a home. If you make $5,000 a month, the amount you can spend on a house will be less than if you make $20,000 each month.

A common rule of thumb is that you should aim to spend at most about 28% of your gross income on housing costs each month. Recently the longstanding 28% rule has been revised to the 30% rule to accommodate higher home costs. In some more expensive areas it may be realistic to budget even more for housing.

Your debt-to-income ratio

Your debt-to-income ratio measures the percentage of your monthly income that you spend on debt service, such as personal loans and credit card payments, student loan payments, and auto loan payments. The more of your income you already dedicate to debt payments, the less you have to pay for a home.

A popular rule of thumb is to spend no more than 36% of your income on debt service, including your housing payment.

Your credit score

Your credit score is a numerical score that lenders can use to determine how likely you are to repay your debts. The less risk you pose as a borrower, the more appealing you are as a borrower. Lenders tend to charge people with high scores lower interest rates, which makes your mortgage payment more affordable.

Lenders usually use the following ranges when looking at credit scores:

• Needs work: 300 – 579
• Fair: 580 – 669
• Good: 670 – 739
• Very good: 740 – 799
• Excellent: 800 – 850

You can boost your score by paying down your loan balances, avoiding late or missed payments, and only applying for new loans or credit cards when you need one.

Your down payment amount

When you buy a home, you pay for a percentage of it upfront at closing. That is called your down payment. They usually range from 3% to 20% of the home’s value, which makes planning important because it’s easy to spend tens of thousands of dollars on one.

The larger your down payment, the less you have to borrow to buy a home, which leads to a lower mortgage payment. For example, if you buy a $500,000 home with a 3% down payment,¹ that means borrowing $485,000. A 20% down payment means borrowing just $400,000, which would both make the principal portion of your monthly payment smaller and reduce the lender’s risk, which may lead to lower interest rates.

The type of loan you choose

There are a few different loan types you can choose when you want to buy a home. Each will help you finance the purchase but differs in factors such including:

• How much the down payment will be
• The amount of interest that will be charged on the loan
• The DTI and credit score required
• The lifelong cost of the loan

For example, FHA loans have mortgage insurance premiums that can last for a long time or the life of the loan, while conventional loans do not charge for mortgage insurance if you have 20% equity in the home. That makes it important to compare your options and look at the long-term cost of each type of loan.

Where you are planning to buy

The adage that real estate is all about location. This still holds true. Some areas are more expensive than others, and homes will cost more, meaning you’ll need to have more money to afford a home there. For example, as of late 2025, the median home sales price in Nantucket County, Massachusetts, is more than $2.4 million, while the median home value in South Dakota, is $320,700.

Even on a local scale, there can be big differences in housing prices. Also, pay attention to local property tax rates, which can play a big role in the ongoing cost of owning a home. A good real estate agent should be able to help you compare neighborhoods and towns in your desired area to find one that’s affordable.

Upfront expenses when buying a house

When you buy a home, you’ll have to pay a large chunk of money upfront, so it’s important to be prepared and have a plan for how you’ll save for these costs.

Closing costs and fees

When you buy a home, you’ll have to pay for closing costs and fees related to both getting a mortgage and completing the purchase. Closing costs account for a number of different charges, including:

• Loan origination fees
• Attorney fees
• Appraisal fees
• Tax service provider fees
• Title insurance
• Government taxes

Prepaid expenses such as property taxes, homeowners' insurance, and interest until your first payment is due

You may be able to negotiate some of these costs, like appraisal fees or title insurance, while others are relatively set. In some cases, you may be able to get seller concessions for some of these costs too. Expect to pay about 2% to 5% of the purchase price in closing costs.

Moving costs

Once you’ve bought your new home, you still have to move in. Depending on how far you’re going and how you plan to do it, moving can be expensive. Moving across town by renting a truck yourself will be cheaper than hiring professionals to help you move across the country, so be sure to budget based on your situation.

Ongoing expenses after buying a house

After you buy a property, you’ll need to be able to afford the ongoing costs. Here are some of them so you can prepare your budget.

Principal and interest payments

Each month when you get a bill from your mortgage lender, you’ll have to make a payment that includes all of the accrued interest and a portion of your loan’s principal. How much this costs will depend on the amount you borrowed, the interest rate of your loan, and the loan’s term.

You can minimize your borrowing costs by getting a loan for an amount you can comfortably afford and maintaining strong credit to help you qualify for a better rate and terms.

Homeowners insurance

Your home is likely your most valuable asset, so you’ll want to protect it by buying homeowners insurance. Most lenders will also mandate that you purchase coverage to protect their collateral. How much insurance costs depends on risk factors such as the age of your home, its value, and where you live.

Be sure to shop around with multiple insurance companies to try to find the best deal.

Property taxes

Property taxes are taxes charged by city and town governments to fund services like schools, road repair, parks and recreation, emergency services, and more. How much you pay will depend on the assessed value of your home and your town’s tax rate.

It’s hard to control how much this will cost you, so it’s important to pay attention to property taxes while you’re conducting your home search.

MIP or PMI

Depending on the type of loan you use to buy a home, you may have to pay for mortgage insurance. Mortgage insurance premiums (MIP) are charged on FHA loans, while PMI is charged on conventional loans if you have less than 20% equity in your home.

HOA fees

Some homes and most condos are part of a homeowners association. These organizations set rules for property owners to help keep communities in good condition and maintain property values. HOAs may also pay for things like lawn maintenance, community events, and amenities like private parks or pools.

Before you buy a home, be sure to check if it is part of an HOA, and if it is, what the monthly HOA fee is.

Maintenance and repairs

After you buy a home, it’s your responsibility to maintain it and keep it in good repair. That can mean anything from giving it a fresh coat of paint from time to time to taking on major work like getting the roof replaced.

Expect to spend between 1% and 2% of your home’s value for maintenance each year.

Tips to get ready to buy a home

If you’re hoping to buy a home, it’s important to plan ahead both for the upfront and ongoing costs of homeownership. These tips can help.

• Set a savings goal: Having a goal for how much money to save each month is a good place to start. That target can incentivize you to focus on saving, and it feels good to reach goals you’ve set. You can also set an overall goal based on how much you want for things like a down payment and closing costs.
• Make sure you have emergency reserves: The last thing you want to do is to spend so much on a home that you don’t have a fund for unexpected costs. This is what’s called being house poor. If you don’t have backup savings, something relatively small like a pipe leak or a car breakdown could become a problem. Before buying, make sure you have a sufficient emergency fund.
• Explore home buyer programs: Many areas have programs that can help first-time or low-income buyers afford a home by offering down payment assistance or other aid.
• Don’t max out your budget: While it can sound appealing to buy a more expensive home, maxing out your budget can put you at risk financially. If your income changes or you lose your job, having a lower housing payment could make it easier to make ends meet.
• Reduce high-interest debt: If you have expensive credit card or other high-interest debt, try to pay it off before you buy a home. You can put the money you were dedicating to that debt toward your down payment savings, and it’ll improve your DTI ratio, helping you get a better mortgage rate.
• Check your credit: Your credit score is a big factor in determining the interest rate of your mortgage. Before you apply for a loan, check your score and identify anything that’s negatively affecting it. You’ll then know what to work on to boost your credit.
• Find a real estate agent: A good agent can help guide your search for a home by helping you understand the things you really want out of a property and what types of homes will be in your budget.

The bottom line: Where you buy and what you buy are critical

When it comes to the cost of housing, the type and size of home you buy, as well as where that home is located, are influential factors. If you’re looking to keep costs low, look for smaller or older properties in less trendy neighborhoods, and you may find more affordable options.

If you’re ready to buy a house, you can apply for a loan with Rocket Mortgage to compare rates.

¹ The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.