One of the first questions I hear from prospective homebuyers is:
“How much money do I actually need to buy a house?”
And there’s a reason the answer can be confusing.
You hear that you need 20% down. Then someone tells you 3% is enough. Someone else bought with down payment assistance. And your friend says the seller paid most of their closing costs.
So what’s the real number?
There isn’t one.
The amount of cash you need depends on your loan program, purchase price, financial profile and something buyers sometimes overlook: how the purchase contract is structured.
Here’s a better way to think about it.
1. Your Down Payment
Let’s clear up the biggest misconception first:
You do not necessarily need 20% down to buy a home.
Depending on your qualifications and loan program, options can include:
Conventional financing with as little as 3% down
FHA financing with 3.5% down
VA financing with potentially 0% down for eligible borrowers
Down payment assistance programs that can help qualified buyers with down payment and/or closing costs
Putting 20% down can certainly have advantages. But waiting years simply because you believe 20% is required could mean delaying homeownership unnecessarily.
I wrote an entire article about this because the 20% down myth is so common: Do You Really Need 20% Down to Buy a Home?
2. Don't Forget About Closing Costs
Your down payment and closing costs are two different things.
Closing costs can include items such as:
Lender and third-party fees
Appraisal
Title-related expenses
Prepaid homeowners insurance
Property tax escrows
Prepaid interest
The exact amount varies based on the loan, property, location and even the date you close.
That's why I don't love telling buyers to simply assume a generic percentage for closing costs. I'd rather calculate the numbers based on the actual situation.
3. What About Earnest Money?
When your offer is accepted, you'll typically make an earnest money deposit.
Here's the part many first-time buyers don't realize:
Earnest money generally isn't an additional cost on top of everything else.
Assuming the transaction closes normally, your earnest money is typically credited toward the funds you owe at closing.
For example, if you deposit $5,000 in earnest money, you haven't necessarily added another $5,000 to the cost of buying the home. You've essentially paid part of your required funds earlier in the process.
4. The Seller May Be Able to Help
This is where smart negotiation can make a significant difference.
Depending on the loan program and transaction, a seller concession may be used toward allowable closing costs, prepaid expenses and potentially an interest-rate buydown.
That can dramatically change the amount of cash a buyer needs at closing.
It's also why I don't think buyers should focus exclusively on getting the seller to accept the lowest possible purchase price.
Sometimes negotiating a seller concession can be financially more valuable than negotiating the same amount off the price.
The best deal isn't always the lowest price. Sometimes it's the deal that's structured the most intelligently.
5. Down Payment Assistance Isn't Only for Low-Income Buyers
Here's another assumption that causes buyers to count themselves out unnecessarily.
There are numerous down payment assistance programs, and their eligibility requirements vary considerably.
Some programs have income restrictions. Others may target particular occupations, geographic areas or types of buyers.
And some income limits are much higher than people expect.
I've had conversations with buyers who assumed they made too much money to qualify for assistance before we ever looked at the actual guidelines.
Don't disqualify yourself. Find out first.
The Question I'd Rather You Ask
Instead of asking:
“How much money do I need to buy a house?”
I'd rather you ask:
“How much of my money should I use to buy the house?”
Those are very different questions.
Just because you can put $80,000 down doesn't necessarily mean you should.
You may also need money for:
Emergency savings
Moving expenses
Furniture
Repairs or improvements
Investments
Other financial goals
Getting the mortgage approved is only part of the equation.
I want my clients to be financially comfortable after they get the keys, too.
Dave's Take
After more than 26 years in mortgage lending, I've seen this go both ways.
I've seen people delay buying for years because they thought they needed tens of thousands of dollars more than they actually did.
I've also seen buyers eager to put virtually every available dollar into their down payment without considering what their bank account would look like the day after closing.
Neither approach starts with the right question.
Your mortgage should fit your financial plan—not the other way around.
Before deciding you're not ready, let's find out what the numbers actually look like.
We can compare different down payments, loan programs, seller concessions and down payment assistance options and then work backward from your goals.
You might discover you're not ready yet—and that's okay. Then we'll know what needs to happen next.
But you might also discover you're much closer than you thought.
The Bottom Line
There isn't one magic amount of money required to buy a home.
Your down payment is only one piece of the equation.
The better question is how to structure your purchase so you can buy the home while keeping your overall financial picture strong.
If buying a home is somewhere on your radar—even if you think you're months or years away—I'd rather help you understand the numbers early.
Not sure how much cash you'd actually need to buy? Let's run the numbers before you start moving money around or counting yourself out.
About the Author
Dave Cook | Branch Manager & Loan Officer
Dave Cook is the founder of Denver Mortgage Lounge, a Division of Luminate Bank. For more than 26 years, he's helped individuals and families navigate mortgage financing and make smarter real estate decisions.
Dave's approach goes beyond getting a loan approved. He believes mortgage financing should support a client's broader financial goals and long-term wealth-building strategy.
Dave Cook
Branch Manager | Loan Officer
Denver Mortgage Lounge, a Division of Luminate Bank
201 Columbine Street, Suite 300
Denver, CO 80206
Phone: 303-226-8735
Email: dave@denvermortgagelounge.com
Website: denvermortgagelounge.com
Dave Cook NMLS #274175
Luminate Bank NMLS #1281698
Equal Housing Lender
This article is for educational purposes only and is not legal, tax or financial advice. Loan programs, guidelines and eligibility requirements are subject to change. All loans are subject to credit approval and program eligibility.
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