How Much Money Do You Need To Buy A House?

Whether you’re purchasing a starter home, a forever home or a vacation home, buying a house is an exciting endeavor. But, this potentially life-changing investment can also get expensive, especially when you consider that it’s likely one of the largest purchases you’ll ever make.

Many costs are involved in the process of buying a home, from the down payment and closing costs to homeowners insurance and property taxes. Being familiar with all the costs associated with homeownership will help you know how much you need to buy a house.

As you figure out what you will need to spend and what you can afford, it’s worth keeping in mind that experts recommend spending no more than 28% of your income on housing.

How Much Does It Cost To Buy A House In 2024?

According to the National Association of REALTORS^®, the median sales price in the U.S. in June 2024 was $426,900 for a single-family home. While this number is a helpful reference for home buyers in 2024, the cost to buy a house will depend on several factors – including location, housing market trends and home size.

A Breakdown Of Upfront Home Buying Costs

As you begin your home search, it’s wise to consider several upfront home buying expenses. Here are some of the most significant home buying fees, along with an estimate of how much they’ll be on a $400,000 home you’re financing with a conventional conforming loan:

Down Payment

Simply put, a down payment is the cash a home buyer pays upfront in a real estate transaction. It’s a percentage of the home’s purchase price, and it’s possible in some cases to get a conventional loan with as little as 3% down.

However, a down payment of 20% or more may mean a lower mortgage rate and will provide an opportunity to avoid paying private mortgage insurance (PMI).

The minimum down payment requirement in terms of percentage is based on the type of home loan you apply for.

Here’s the minimum down payment percentage for the four main home loan programs, (assuming you’re buying a primary residence that’s a single-family home) and jumbo loans. Keep in mind that not everyone buying a primary residence/single-family home will be permitted to make a down payment this low.

Earnest Money

The earnest money deposit is a sum of cash a home buyer typically pays to show the seller they’re committed to buying the seller’s home after signing a purchase agreement. It usually equals 1% – 2% of the home’s purchase price. Though this deposit isn’t usually required, it’s become pretty standard. The earnest money deposit is customarily applied to any down payment you make at closing.

Closing Costs

Another significant expense in buying a house is closing costs, which are various fees you’ll pay at closing. Closing costs can range from around 3% – 6% of the loan amount. You can ask the seller to pay for part or all of your closing costs, but sellers are less likely to do so in a competitive real estate market.

Here are a few of the closing costs you should be prepared to pay:

• Home appraisal fee: Your lender will order a property appraisal, for which you’ll have to pay the home appraisal fee. An appraisal typically costs $300 – $600. However, it may cost more if the property has multiple units or is located in a remote area.
• Title fees: The title company will charge title fees, which cover the cost of a record search to ensure the absence of any claims or judgments against the property. These fees will make up a large part of your closing costs.
• Mortgage origination fee: The mortgage origination fee sometimes covers the cost of both processing and underwriting your home loan. This fee is typically 0.5% – 1% of the loan amount and is sometimes referred to