How Much Money Do You Need to Buy a House?

You’ve spent years saving for a down payment and think you’re finally ready to buy a home. Then closing day approaches and you find out you’re going to need money for closing costs, moving costs and a bunch of other stuff. Many first-time buyers don’t see these expenses coming until it’s almost too late to plan for them. It probably makes you wonder, How much money do you need to buy a house?

Here’s how that number breaks down—and how to hit it with a plan instead of a scramble.

How Much Money Do You Really Need to Buy a House?

The total cash you need to buy a house is almost always more than your down payment alone—often tens of thousands of dollars more! Banks and mortgage companies have a name for it: cash to close.

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Cash to close is the total amount of money a home buyer needs at the time of purchase, including the down payment, closing costs and any lender-required reserves. It’s the real number to save toward, not just the down payment alone.

Add it all up, and most first-time buyers need somewhere between $25,000 and $60,000 in cash to buy a house, depending on the home’s price, the cost of moving, and the size of the down payment. That number is made up of six categories:

• Down payment
• Closing costs
• Earnest money
• Moving costs
• Cash reserves

These expenses show up at different points in the buying process, and you could end up scrambling at the closing table if you overlook them.

Before you shop for a home, you need to get a handle on how much house you can afford. Our guideline is that your monthly mortgage payment (including taxes and insurance, as well as PMI and HOA fees, if applicable) should be no more than 25% of your take-home pay. That will help you figure out how much you need for a down payment.

How Much Down Payment Do You Need on a House?

We recommend a down payment of 20%. If you’re a first-time home buyer, 5–10% is okay. But if you put 20% down, you won’t have to pay private mortgage insurance, and you’ll start out with real equity in your home.

Private mortgage insurance (PMI) is a monthly premium that lenders charge when a borrower puts less than 20% down on a conventional loan. It protects the lender, not you, if you default on the loan, and it goes away once you reach 20% equity.

Here’s how the main loan types compare:

Bottom line: We don’t recommend any mortgage loans except a conventional, 15-year, fixed-rate mortgage with 20% down to avoid PMI.

What Are Closing Costs, and How Much Should You Budget for Them?

Closing costs are the fees and charges beyond the down payment that a buyer pays to finalize a home purchase. They typically cover lender fees, title work, recording fees, and prepaid taxes and insurance. You should budget 3–4% of your loan amount for closing costs.⁶ On a $300,000 loan, that’s $9,000–12,000 due at the closing table, on top of your down payment.

Common closing costs include:

• Loan origination and underwriting fees
• Home appraisal, commonly around $350⁷
• Home inspection, commonly $300–500⁸
• Title search and title insurance
• Recording fees
• Prepaid expenses

Earnest money is also included in the closing costs. That’s a deposit (often 1–5% of the purchase price) that shows a seller you’re serious about buying their home. It’s not an extra cost and is usually credited toward your down payment or closing costs at closing.

Prepaid expenses are up-front payments (including several months of property taxes, homeowners insurance and interest) that go into escrow at closing. They’re separate from closing costs and can add thousands of dollars to what you need on closing day.

What Other Up-Front Costs Should You Plan For?

Other costs many homebuyers don’t anticipate are the ones associated with moving to your new home. And those costs add up fast:

• Hiring movers or renting a truck—a local move alone averages about $600–5,000 with professional movers, and long-distance moves can reach up to $10,000⁹
• Utility deposits and setup fees at your new address
• Immediate essentials—cleaning supplies, curtains and more
• A slightly higher grocery and takeout bill while you unpack

These are the hidden costs of buying a house that rarely make it into a down payment calculator. The earlier you start saving for them, the less they’ll sting when moving week arrives.

And one more thing: Don’t raid your retirement accounts to hit your savings goal faster. That not only puts you in a bad financial position down the road but also opens you up to all kinds of penalties and taxes. It’s not worth it.

How Much Should You Keep in Cash Reserves?

On closing day, lenders often require you to have cash reserves in your bank account equal to two to six months of mortgage payments. This is separate from your down payment and closing costs. Having cash reserves shows lenders that you can keep paying your mortgage if you lose your job or your income is disrupted.

Your emergency fund counts as part of your cash reserves. After all, a fully funded emergency fund (3–6 months of expenses) is there for that exact reason: to be a buffer in case life happens. Barring one of those actual emergencies like income loss, though, your fund needs to stay fully intact. Don’t spend your emergency fund on anything related to buying the home.

What Will Homeownership Cost You Each Month?

Once you close, your monthly costs of homeownership go beyond just principal and interest. You should also budget for:

• Property taxes
• Homeowners insurance
• PMI, if you put down less than 20%
• HOA dues, if applicable
• Utilities
• Ongoing maintenance and repairs

A RamseyTrusted^® real estate agent can walk you through what property taxes, insurance and HOA dues typically run in your specific market before you ever make an offer so that none of this is a surprise later.

How Do You Get Financially Ready to Buy a House?

Being financially ready to buy a home is about more than having the money. Before you even think about going house shopping and saving up for a down payment, there are two important boxes to check in your overall finances so that your new home doesn’t end up becoming a burden down the road:

1. Get rid of all consumer debt and stay debt-free.
2. Save a fully funded emergency fund of 3–6 months of expenses.

Once you’ve knocked out those two goals and have a hefty down payment work through these steps in order:

1. Add up your total cash-to-close target: down payment, closing costs, moving costs and cash reserves.
2. Choose a conventional, 15-year, fixed-rate mortgage.
3. Estimate your closing costs at 3–4% of your loan amount.
4. Budget separately for moving and move-in costs.
5. Get preapproved with a lender.
6. Compare loan estimates from at least three lenders before you commit.

Hannah, a member of THE Ramsey Baby Steps Community on Facebook, put the whole framework into one sentence while weighing whether to buy a home now or wait: “We are debt-free, have an emergency fund, and have $22,000 saved for a down payment and $4,000 saved for closing costs.”

“We are debt-free, have an emergency fund, and have $22,000 saved for a down payment and $4,000 saved for closing costs.”

— Hannah from Gainesville, GA

An Example With Real Numbers

As an example, here’s a breakdown of a couple buying their first home for $400,000 with 10% down:

• Down payment (10%): $40,000
• Closing costs (about 3% of the $360,000 loan): $10,800
• Moving costs: $800
• Cash reserves (about two months of mortgage payments): $8,000
• Total cash needed: $59,600

This is the reality, folks. A plan for buying a home means hitting a number like this one before you even start touring houses, not just hoping you have everything when you get to the closing table.

It’s not impossible. It can be done. It just takes a lot of focused intensity and saving, and it’s going to take time. But you can do it.

Talk to a RamseyTrusted Agent

Before you think about buying a home and saving for your down payment, two things need to happen: get rid of all consumer debt, and build a fully funded emergency fund of 3–6 months of expenses.

These two steps are part of the Baby Steps—a real plan for building wealth that’s been used successfully by millions of families for over 30 years. Following these steps—along with having a healthy down payment and a monthly payment that fits your budget—will make your new home a blessing instead of a burden.

But you don’t have to work out every number on your own. A RamseyTrusted real estate agent that knows your local market (what closing costs, taxes and fees actually run in your area) can help you buy the right way. That’s why they’re the only agents we trust to give you the service you deserve.