How much money do you need to buy a house? Cost breakdown

Buying a house isn’t just a down payment and a mortgage. It also means closing costs, home insurance, property taxes, and more.  

The financial reality of homeownership includes both one-time costs that you'll pay during the buying process and ongoing expenses after closing. 

Understanding exactly how much money you need to buy a house requires research and a solid plan. But with the right preparation and lender, you can navigate these expenses confidently and secure the keys to your new home. Here’s a breakdown of the costs and how to decide the amount you need to save.

How much is a house?

Understanding current home prices provides a foundation for calculating your total homebuying budget. According to recent data, the median home price in the United States varies considerably by region. 

So far, the median home price in the 2020s has been around $336,000. Northeast markets typically command higher prices, with median home values exceeding $500,000 in some major metropolitan areas. 

Meanwhile, the Midwest and South regions generally offer more affordable options, with many markets featuring median prices below the national average. Western states are more mixed, with some areas like California showing premium pricing while others remain more accessible to average buyers.

Take some time to research the market in the area you’re looking to buy. Check historical data to see how house prices have changed over recent years. 

Upfront costs of buying a house

The one-time expenses associated with homeownership can add up quickly. Here’s more about each component to help you prepare your finances accordingly.

Down payment

The down payment represents the most significant upfront expense when purchasing a home. 

Qualifying for conventional loans typically requires you to put down 5–20% of the home's purchase price, though some loan programs allow smaller down payments. For a $350,000 home, a 10% down payment would equal $35,000. First-time homebuyers can qualify for special programs that reduce this requirement, making homeownership more accessible.

Closing costs

Closing costs encompass various fees that finalize your home purchase. These expenses typically range from 2–5% of the home's purchase price, including title insurance, attorney fees, appraisal costs, and loan origination fees. 

At Better, we do charge lender fees but maintain transparency with no hidden costs, helping you understand exactly how much money you’ll need and what you're paying for.

Moving costs

Professional moving services vary based on distance and the amount of belongings you're relocating. Local moves typically cost $1,000–3,000, while long-distance relocations can range from $3,000–7,000. Many buyers underestimate these expenses, so factoring them into your budget can prevent last-minute financial stress.

Home inspection

A professional home inspection usually costs a few hundred dollars and provides valuable insight into the property's condition. This investment can save thousands of dollars later by identifying potential issues before you complete the purchase. Having any necessary repairs made before you move in can be part of your negotiations or help you negotiate a lower price when closing. 

Unless you’re a housing wizz, you should never skip this step, as it protects your investment and provides negotiating power.

Homeowners insurance

Your lender requires homeowners insurance before closing, and you'll typically pay the first year's premium upfront. Annual premiums can be up to $2,000 or more, depending on your home's value, location, and coverage level. Shopping around for insurance can help you find competitive rates without sacrificing protection.

Earnest money deposit

Earnest money demonstrates your serious intent to purchase the home. Typically ranging from 1–3% of the purchase price, this deposit applies toward your down payment or closing costs at settlement. The amount varies by local market customs and the competitiveness of your offer. While this isn’t a cost per se, it’s important to know that you’ll need this money to secure your offer.

Breakdown cost example

Understanding the money to buy a house becomes clearer with a concrete example. Let's examine the costs for purchasing a $350,000 home with a 10% down payment.

Cost	Amount	Notes

| Down payment (10%)| $35,000 | Applied to the purchase price
| Closing costs (3%) | $10,500| Includes various fees and services
| Home inspection| $500 | Professional property assessment
| Moving costs| $2,500 | Local professional movers
| Earnest money (2%)| $7,000 | 2% of purchase price
| Homeowners insurance | $1,200 | First-year premium
| Total upfront costs | $56,700| |

In this scenario, the money required to buy a house totals approximately $56,700. Remember that earnest money gets credited toward your purchase, reducing the cash needed at closing.

Ongoing homeownership costs

Once you own a home, several ongoing expenses become part of your monthly budget. Understanding these costs before purchasing helps you determine what you can afford on a long-term basis.

Mortgage payments

Your monthly mortgage payment includes principal, interest, taxes, and insurance. Payment amounts depend on your loan amount, interest rate, and loan term. 

Better offers competitive rates with a streamlined digital application process that gets you pre-approved quickly. Use Better's mortgage calculator to estimate your monthly payment based on different loan scenarios to see how various factors affect your budget.

...in as little as 3 minutes – no credit impact

Mortgage insurance

If your down payment is less than 20%, you'll likely have to pay mortgage insurance. Private mortgage insurance (PMI) for conventional loans typically costs 0.3–1.5% of the loan amount annually. FHA loans often require mortgage insurance premiums that continue for the life of the loan, making this an essential factor in your long-term budget planning.

Homeowner association fees

If your property is part of a community association, homeowner association (HOA) fees apply. Monthly fees vary, from as low as $50 to several hundred, depending on the amenities and services provided. These fees cover standard area maintenance, shared amenities, and sometimes utilities, so factor them into your monthly housing budget.

Property taxes

Property taxes vary greatly by location, typically from 0.5–2.5% of your home's assessed value annually. Local tax rates depend on your municipality's schools, infrastructure, and public services needs. Many lenders collect these taxes monthly through escrow accounts, spreading the annual cost across 12 payments.

Utilities

Monthly utility costs for electricity, gas, water, and internet also vary by location. For example, if you’re buying a home in a moderate climate like southern California, you’ll likely have lower utility costs than somewhere like Minnesota with more extreme weather conditions and temperature fluctuations.

Other factors include your home's size, age, and local rates. Energy-efficient homes help reduce these ongoing expenses, making them more attractive to budget-conscious buyers.

Maintenance and repairs

Regular home maintenance and unexpected repairs are inevitable parts of homeownership. Budget approximately 1–3% of your home's value annually for these expenses. For example, a $300,000 home might require $3,000–9,000 yearly for maintenance, repairs, and improvements.

Prepare to buy a home

Getting ready for homeownership requires strategic financial planning. Here are the key steps to prepare yourself for this significant investment:

— Create a comprehensive budget: Track your income and expenses to determine how much you should save for a house. Include both upfront costs and ongoing monthly fees in your calculations.

— Check and improve your credit score: Higher credit scores qualify you for better interest rates, reducing long-term costs. Review your credit report and address any issues before applying for a mortgage.

— Build your down payment fund: Start saving early for a down payment and closing costs. Consider a high-yield savings account to grow your money while keeping it accessible.

— Get pre-approved for a mortgage: Pre-approval shows sellers you're a serious buyer and helps show budget limitations. Better's online pre-approval process takes just minutes to get started so you have a better idea of what you can afford.

— Research first-time homebuyer programs: Many states and localities offer programs that reduce down payment requirements or provide closing cost assistance for qualified buyers.

Costs of buying a house FAQs

Are there any programs for first-time homebuyers that can help cover costs?

Yes, FHA loans allow down payments as low as 3.5%, while VA loans offer zero-down options for qualifying veterans. Many states provide down payment assistance programs, and some employers offer homebuying benefits. USDA loans serve rural areas with no down payment requirements for eligible buyers.

When should I start to save for a house?

Start saving when you decide homeownership is a goal, ideally several years before you plan to buy. The earlier you begin, the more time your savings have to grow. Consider automatic transfers to a dedicated house fund on paydays, and adjust your timeline based on local home prices and your income growth.

What is an escrow account?

An escrow account is a special account where your lender holds money for property taxes and homeowners insurance. You pay 1/12th of your annual tax, insurance costs, and mortgage payment each month. When these bills come due, your lender pays them from the escrow account, ensuring these essential expenses are always covered.

Take the next step toward homeownership

When you buy a house, you're making both a financial investment and a lifestyle choice that brings long-term benefits. Proper planning ensures you're ready for every aspect of homeownership, from the initial down payment through ongoing monthly expenses, without any surprises. 

Better helps make the mortgage process straightforward and transparent, securing competitive rates without hidden fees. With the proper preparation and financial planning, you can confidently take the next step toward owning your dream home.

...in as little as 3 minutes – no credit impact