How much money do you actually need to buy a house?

Not how much you need to qualify for the mortgage.

How much actual money do you need to get the keys?

Because there’s a difference.

And a lot of people still think they need 20% down before they can even start shopping.

That’s simply not true for many mortgage programs.

But that doesn’t mean buying a house is free either.

Let’s break down where the money goes.

Do You Need 20% Down to Buy a House?

No.

Let’s get that out of the way.

There are conventional mortgage programs that allow eligible borrowers to put as little as 3% down.

FHA financing can allow eligible borrowers to put 3.5% down.

And certain eligible buyers can use VA financing with no down payment.

That doesn’t mean everybody qualifies for those options.

And it doesn’t mean those programs have identical costs.

But the idea that everybody needs 20% down is just wrong.

What’s the Difference Between Down Payment and Closing Costs?

Your down payment is the portion of the purchase price you’re paying rather than borrowing.

Closing costs are expenses associated with obtaining the mortgage and completing the transaction.

Those can include things like:

Lender fees.

Appraisal fees.

Title and settlement charges.

Recording fees.

Certain taxes.

Prepaid insurance.

Prepaid interest.

And initial escrow deposits.

The exact expenses vary by loan, property, and location.

That’s why the down payment alone doesn’t tell you how much cash you need.

How Much Are Closing Costs?

Closing costs vary.

As a broad planning estimate, buyers sometimes use approximately 2% to 5% of the purchase price, excluding the down payment.

But that’s not a quote.

And it’s not a rule that applies to every transaction.

A $400,000 purchase with one loan program might look very different from the same purchase with another program.

Property taxes, insurance, loan pricing, and local fees can all change the number.

I’d rather calculate your actual estimated costs than throw out a percentage and hope it’s right.

What Is Earnest Money?

Earnest money is a deposit a buyer may provide after entering into a purchase contract.

It demonstrates that the buyer is serious about the transaction.

The amount and deadlines depend on the contract and local practices.

Here’s the important part.

Earnest money is generally credited toward the buyer’s transaction costs at closing.

It isn’t necessarily an extra cost on top of everything else.

But whether it’s refundable if the transaction falls apart depends on the contract and applicable contingencies.

Don’t assume you automatically get it back.

Understand the contract before you send the money.

What Are Prepaid Expenses and Escrow Deposits?

Some expenses are collected upfront even though they relate to future periods.

For example, you may need to pay a homeowners insurance premium.

You may also need to fund an escrow account for property taxes and insurance.

There may be prepaid mortgage interest depending on your closing date.

These costs can surprise buyers because they aren’t always thought of as traditional lender fees.

But they’re part of the cash-to-close conversation.

What Does Cash to Close Actually Mean?

Cash to close is the amount you need to bring to settlement after accounting for the transaction’s costs, credits, deposits, and financing.

That may include:

Your down payment.

Closing costs.

Prepaid expenses.

Initial escrow funding.

Minus applicable credits and deposits already paid.

Your Loan Estimate and Closing Disclosure help explain these figures.

And no, I don’t want you discovering your final cash requirement the morning you’re supposed to sign.

We should be reviewing these numbers throughout the process.

Example: Buying a $400,000 House

Let’s use a simple hypothetical example.

Purchase price: $400,000.

Down payment: 5%, or $20,000.

Estimated closing costs and prepaid expenses: $12,000.

Total estimated funds needed before accounting for credits: $32,000.

Now imagine you’ve already paid $5,000 in earnest money.

Assuming that deposit is fully credited at closing, the remaining amount would be approximately $27,000.

If the transaction also includes an allowable $8,000 seller credit applied to eligible costs, that could reduce the remaining amount to approximately $19,000.

These are illustrative numbers only.

Actual costs, seller-credit limits, and the final cash requirement depend on the transaction.

The point is that purchase price and down payment don’t tell the whole story.

Can a Seller Help Pay Closing Costs?

Potentially.

Seller credits can be negotiated as part of the purchase agreement.

Depending on the loan program, they may help cover eligible closing expenses, discount points, or other permitted costs.

There are limits.

And those limits aren’t identical across FHA, VA, and conventional financing.

This is why I want the financing conversation happening before the offer is written.

A well-structured seller credit can sometimes help more than a small price reduction.

Seller credits can sometimes reduce your cash needed at closing. Here’s what sellers can actually pay for.

Can You Buy a House With No Money Down?

Some eligible borrowers can obtain mortgages with no required down payment.

VA financing is one example.

Certain USDA loan options are another.

But zero down payment doesn’t automatically mean zero cash needed for the entire transaction.

Closing costs, prepaid expenses, earnest money, and other costs may still apply.

Credits, assistance, or other permitted arrangements can sometimes reduce the amount a buyer needs.

But let’s calculate the real number instead of promising everybody a free house.

Should You Use All Your Savings to Buy a House?

I’d be careful with that.

Just because you have enough money in the bank to cover the down payment and closing costs doesn’t mean you should empty the account.

You may need money for:

Moving.

Repairs.

Furniture.

Unexpected expenses.

And the normal stuff life throws at you.

Having a financial cushion after closing matters.

I’d rather see somebody buy a slightly less expensive house and keep some savings than stretch themselves so thin they can’t handle a broken water heater.

How Can You Reduce the Cash Needed to Buy?

There may be several options depending on your situation.

A lower-down-payment loan program.

Seller credits.

Eligible gift funds.

Down payment assistance.

Lender credits.

Or a different purchase price and financing structure.

Each option has its own requirements and tradeoffs.

Some may increase the monthly payment or overall borrowing cost.

So don’t just ask how to bring the least money to closing.

Ask what the entire mortgage will cost you.

The Bottom Line

You don’t necessarily need 20% down.

You do need to understand your actual cash requirements.

Down payment.

Closing costs.

Prepaid expenses.

Earnest money.

Seller credits.

And what you’ll have left in the bank after closing.

Those are the numbers that matter.

Before deciding how much cash to use, figure out how much house you can comfortably afford.

If you’re thinking about buying a house, let’s figure out the actual cost before you start shopping.

No guessing.

No surprises.

Just a clear plan.

Getting properly preapproved early can help you understand your financing options before you make an offer.