Buying a home is one of the biggest financial decisions you’ll ever make, and it’s not just about selling prices. There are many costs to consider, from down payments to closing costs. So, how much money do you really need to buy a house? Whether you’re buying a home in Seattle or a home in Denver, this Redfin guide breaks down any major costs, effectively helping your budget and avoid surprises.
How much money do you need to buy a house?
When purchasing a home, you need to make a budget, not just a down payment. This is the important cost:
Serious Money Deposit Down Payment Closure Cost Prepaid Costs (Tax, Insurance, Interest) Mortgage Costs Mortgage Payment Mortgage Insurance (If Applicable) HOA Fees (If Applicable)
We use the US median ($420,000) as a benchmark to estimate these costs.
Serious money deposits
After the seller accepts your offer at home, serious money is paid. Buyers will pay this amount before closing at home. The purpose of paying a serious money deposit is to assure the seller that you are acting in good faith as a buyer. If you end up retreating from a transaction without a good reason, money serves as a form of compensation. Typically it ranges from 1% to 3% of home prices. For a $420,000 home, expect to pay between $4,200 and $12,600. This amount usually applies to down payment or closing costs.
down payment
A down payment is a percentage of the home price that is paid in advance. Some loans allow 3-5% lower payments, but many buyers aim for 20% to avoid private mortgage insurance (PMI). Based on the median down payment of 15%, it looks like this:
3% Down: $12,600 5% Down: $21,000 10% Down: $42,000 15% Down: $63,000 20% Down: $84,000 (avoid PMI)
A higher down payment can reduce your monthly mortgage and reduce the total interest paid over time.
Closure costs
Any costs associated with the purchase and sale of the home, such as taxes, title insurance, and lender fees, are considered closure fees. They may vary based on the loan program, but you can usually expect to pay 2% to 5% of the purchase price as a home buyer. For a $420,000 home, you can pay between $8,400 and $21,000.
What is included in the closure fee?
Prepaid Cost
Prepaid costs are prepaid payments made by home buyers to cover the costs in advance. These will be paid before the actual due date. While some may put them together at closing costs, prepaid costs are kept in escrow accounts that distribute payments as needed. These include:
Property tax: Usually 1-2% of home price, 2-3 months advance payment upon closing. Homeowner Insurance: Usually a 2-3 month prepaid fee will cost $1,500-3,000 a year. Mortgage Interest: Relative interest for the remaining days of the month of closing. We guarantee that your first full mortgage payment will match your loan schedule.
Prepaid costs help ensure the latest in taxes and insurance and prevent delays or expiration of coverage.
Mortgage interest, homeowner insurance. Property taxes and initial escrow deposits are all under the umbrella of prepaid costs.
Monthly mortgage payments
Mortgage payments are made monthly to cover the costs of purchasing a home. There are two components to paying a mortgage. The principal is what is repaid and interest over time. Home buyers who make more down payments will ultimately have lower principal amounts and, in most cases, lower interest rates. A mortgage calculator can help you determine what amounts you can expect to pay each month. For a $420,000 home with a 20% down payment and a 7% interest rate, this would be a $2,029 monthly payment.
Mortgage insurance
PMI, or private mortgage insurance, is the cost paid by a home buyer who protects lenders by default on a mortgage. If you lower your home by less than 20%, you will probably have to pay this additional fee. On average, PMI costs between 0.5% and 1.5%.
Estimated PMI for $336,000 loan (20% down): $1,680-$5,040 per year
. Factors such as credit score and loan term can ultimately affect how much money your PMI payments. Once you reach 20% capital in your home, the PMI will be removed.
HOA Fees
Some housing developments, particularly townhomes and condominiums, are managed by an organization known as the Homeowners Association (HOA). HOA funds community repairs, maintenance and security. These funds are collected through HOA fees paid by the homeowner each month. The amount you pay will vary depending on the particular home development. In most cases, HOA fees usually cost between $200 and $300 per month. A community that offers a lot of extra amenities can expect to pay more. If you live in a city with a high cost of living, like San Francisco, you’ll have to spend more money on funding the HOA.
Travel cost
Travel costs vary greatly depending on the distance, the size of your home, and whether you choose to hire a professional or DIY movement. Here’s what you can expect:
Local Movements (within the same city/state): Average $1,250. Long distance movement (out of state or nationwide): More than $2,500-$5,000, depending on mileage and load size. DIY Movement: Renting a moving truck and handling your own move will significantly reduce costs, and truck rentals are typically between $100 and $1,500, in the fuel and supply range.
Additional factors such as packaging services, mobile insurance and storage fees can also affect total costs. Careful planning and price comparisons can help keep travel costs manageable.
How much money should I save to buy a house?
As a general rule, we recommend saving at least 25% to 30% of the price of the home you want to buy. Please note that you need to cover more than the initial down payment.
Estimated savings required for your home at different price ranges:
Home prices
Total cost of 20% reduction (3%)
$300,000
$60,000 $9,000 – $75,000 $420,000 $84,000 $12,600
~$105,000
$600,000 $120,000 $18,000
~$150,000
Home Buying Cost FAQ
What other ongoing costs should you consider after purchasing a home?
Beyond mortgages, property taxes and insurance, you also need to budget for maintenance, repairs, utilities and, in some cases, HOA fees. Experts recommend taking 1-3% of the annual home value for maintenance costs.
What is an Escrow account? Why is it necessary?
An escrow account is a special account held by a lender to cover property taxes and homeowner insurance. A portion of your mortgage payments are sent to this account each month to ensure that these invoices are paid on time.
Is there a first-time HomeBuyer program that can help with costs?
yes! Many states and cities offer down payment assistance programs, grants and low-interest loans for first-time home buyers. FHA, VA, and USDA loans also offer options with lower down payment requirements.
How can I lower my mortgage interest rate?
You can lower your interest rate by improving your credit score, increasing your down payment, or purchasing discount points (paying an additional fee to lower your interest rate over the lifespan of your loan).
