How Much Money Do You Really Need to Buy a House

If you’re thinking about buying a home, you might get easily overwhelmed at the thought of everything you need to do to prepare for this major purchase. Becoming a homeowner can be exciting, but there’s also so much to learn about homeownership. Early on, the concept of money will surface as you wonder how much do I need to buy a house?

This is a commonly asked question that doesn’t have just one answer. Many different factors come into play when determining how much money you need to have saved or how much you might spend when buying a house. In this article, we’ll discuss what those factors are and what to consider so you can determine a realistic amount to help you achieve your goal of homeownership.

Assess Home Prices In Your Area

Start by reviewing home prices in your area. Home prices vary greatly depending on where you live meaning a 3-bedroom, 2-bathroom home could buy hundreds of thousands more in California than it would be in Oklahoma. Determine whether you’re looking to live in a major city, suburb, or rural area.

Start looking at home listings in potential towns to get an idea of what you may want. If you need a solid reference point, the average home price in the U.S. is $355,852 according to Zillow, Motley Fool states there’s been a 30% home price increase since 2020 and they report the average U.S. home price to be around $428,700. While different sources present different figures, this should give you a good idea of what to expect in today’s housing market.

Determine How Much You Want to Put Down

Your down payment is an important number to factor in when trying to figure out how much you need to buy a house. The most common rule of thumb is to put 20% down, but it’s not as simple as this anymore. With homes getting more expensive, 20% can seem unattainable to many people.

For example, let’s say you find a home listed at $350,000. If you were to put down 20%, that would be $70,000. Putting down a minimum of 20% is beneficial in that it helps you avoid paying Private Mortgage Insurance (PMI) and it can lower your monthly mortgage payment so it’s more affordable.

However, you don’t need to put 20% down. You may only want to put 10% down. Also, the type of home loan you’re getting matters. With an FHA loan, you only need to put down a minimum of 3.5%. Conventional mortgages require around 5% down. There’s also a VA loan if you’re in the military or a USDA loan if you’re considering moving to a more rural area. Both of these home loans are backed by the government and require as little as 0% down.

Consider Your Credit

Your credit score is another important number when considering how much you need to buy a house. Ideally, you want your credit score to be as high as possible. This will help you qualify for the lowest interest rate options. Even a half of a percentage difference could cost you thousands more in interest over the life of your mortgage so this is important.

Check your credit before applying for a mortgage and shopping for homes. Consider working with a credit counselor or credit repair program if you have records of late payments or delinquent accounts on your credit.

Also, you can take some time to start building positive credit history with a secured credit card or credit builder loan.

RELATED: 5 Steps to Take After Paying Off Your Credit Cards

Consider Your Existing Debt

Your existing debt and other financial responsibilities will come into play when budgeting for a home if you plan on getting a mortgage. Lenders like to see a specific debt-to-income ratio meaning your monthly debt payments are low enough to allow you to reasonably pay your house payment as well.

Even if a lender approves you for a mortgage, it’s a good idea to check your own debt-to-income ratio. Add up all your monthly minimum payments. Then add in your estimated monthly mortgage. Compare this to your income to see how much you’d have left over or what percentage of your income all the payments would be.

If you find that more than 50% of your income is being used for your mortgage and debt payments, it’s time to work on lowering your debt amounts. Create a debt payoff plan to help you get rid of high-interest debts like personal loans or a car loan. Pay down your credit cards to free up more money as well.

This will allow you to have more wiggle room in your budget as a homeowner. However, if you are unable to pay off certain debts before buying a home, factor in those debt payments along with your payoff plan and budget to spend more money in this area when you buy a house.

RELATED: How to Negotiate With Debt Collectors

Estimate the Cost of Repairs and Maintenance

Even after you make a downpayment and save for emergencies, you’ll still need to plan for the ongoing costs of owning a home. Some experts say to budget 1% to 4% of the price of your home per year for maintenance and repairs. Open a savings account and contribute a set amount each month so you can budget for maintenance and repairs ahead of time.

With owning a home, something will always come up and it can seem like the list of house prices never stop so prepare for your finances for this.


How much you need to set aside to buy a house will be a different amount for everyone. It definitely depends on your unique situation, home prices in your area, and how much you feel comfortable spending on housing each month.

Use these tips as a guideline when you start preparing your finances and shopping for homes.