How Much Money Do I Need to Purchase a Home?

How Much Money Do You Need to Buy a Home With a Loan?

Buying a home is one of the biggest financial commitments you'll ever make. While most people use a mortgage loan to help finance a home purchase, it's important to understand that you'll still need some cash upfront, but how much? Here's a breakdown of how much money you may need to buy a home with a loan, and what costs to prepare for along the way.

1. Down Payment

The down payment is typically the largest upfront cost. This is the portion of the home price you pay out of pocket.

• Conventional Loans: These usually require a down payment of 5% to 20% of the home’s purchase price. Some lenders offer conventional loans with as little as 3% down for qualified buyers.

• FHA Loans: Backed by the Federal Housing Administration, these loans allow for down payments as low as 3.5%.

• VA and USDA Loans: If you qualify, these loans may offer 0% down payment options.

• Non-conventional/Credit Union/private loans: Some lenders offer unique financing that may cover 100% and even some of your closing costs.

Keep in mind that loans covering a higher percentage of the purchase price, or less down payment, will usually have higher interest rates, fees, and more strict credentials for qualifying. 

👉 Example: For a $300,000 home:

• 3% down = $9,000

• 10% down = $30,000

• 20% down = $60,000

2. Closing Costs

Closing costs typically range from 2% to 5% of the home’s purchase price. These fees include lender charges, appraisal fees, title insurance, escrow deposits, and paying your buyer's agent if the seller has not agreed to do so. See our post about the  NAR lawsuit for reminders on how real estate commissions are handled.

👉 On a $300,000 home, expect to pay:

• 2% = $6,000

• 5% = $15,000

Sometimes, you can negotiate for the seller to cover part of the closing costs, or roll some into the loan (if allowed).

3. Earnest Money and Due Diligence Fees

In North Carolina, these fees are made when your offer is accepted to show you're serious. The amounts are negotiable and both are applied to your down payment or closing costs later.

👉 For a $300,000 home, earnest/due diligence monies might be:

• 1% = $3,000

• 3% = $9,000

4. Home Inspection and Appraisal

Before closing, you’ll likely pay out-of-pocket for:

• Home Inspection: $300–$1,000+ depending on the types of inspections ordered and size of the home

• Appraisal: $300–$700+

These are usually paid early in the process and not refundable if the deal falls through.

5. Moving and Initial Costs

Budget for:

• Moving expenses

• Utility deposits

• Immediate repairs or furnishings

We recommend setting aside $1,000–$3,000 or more, depending on your situation.

Final Thoughts

Even with a mortgage, buying a home requires careful saving and planning. The actual amount you’ll need can vary based on your loan type, credit score, lender fees, and the housing market in your area. It’s wise to talk to a lender early, get pre-approved, and fully understand your costs before you start house hunting.