How Much Money Do You Need to Buy a Home?

Quick Answer

The true cost of buying a home goes beyond the home’s down payment, closing costs and mortgage payments. You should also add insurance, HOA fees, renovations, routine repairs and furniture into your budget.
A set of three houses made of brick next to a street.

The true cost of buying a home goes far beyond the sales price. In addition to the cost of your down payment, mortgage closing costs and mortgage payment, you'll have to consider the cost of insurance, renovations and other expenses. Ultimately, the total amount you spend may be much higher than you expect. Going into the journey with both eyes open can prevent unwelcome financial surprises along the way. You may want to get started with a mortgage prequalification so that you get a breakdown of estimated costs of buying a home and to find out how much house you can afford.

Here's a rundown of expenses that are likely to pop up during the homebuying process and shortly after move-in. Total costs can vary based on your home's value, location and condition—and even your decorating sensibilities—but these estimates are good jumping-off points when preparing your budget.

Down Payment

Your down payment is the amount of the home's sale price that you pay upfront. The remaining balance is then paid for with your mortgage loan. Some borrowers choose to put down 20%, but this amount can be cost prohibitive for many. With the median home price at $356,700 as of August 2021, according to the most recent data from the National Association of Realtors, a 20% down payment would cost just north of $71,300.

Exploring different mortgage options can help reduce this expense, especially when you compare mortgage rates in order to select your best option. Federally backed FHA loans, USDA loans and VA loans all allow for much smaller down payments—sometimes as little as 0% to 3.5%. If this is your first home, you may also want to look into the first-time home buyer program to find out if you qualify. With a good credit score, you might be able to qualify for a conventional mortgage with a lower down payment.

Closing Costs

Closing costs and other fees are tacked on to your mortgage and paid when finalizing the loan. They generally add an extra 2% to 5% to your final homebuying costs, so it's wise to have that extra cushion in your savings. Closing costs can include all kinds of expenses for servicing your loan. This may include fees related to processing your application, preparing documents and covering your appraisal and home inspection costs.

Property Taxes

With home values on the rise, you can expect property taxes to go up in kind. These taxes are levied by local governments to fund nearby schools, parks, transportation services and more. It comes through as a bill you'll have to pay either on your own or through an escrow account managed by your mortgage servicer.

How much you'll pay is largely dependent on where you live and is expressed as a percentage of your home value. Numbers vary but according to ATTOM Data Solutions, the average annual amount for a single-family home in 2020 was $3,719. Fortunately, there are some ways to save here:

  • Compare your tax rate to your neighbors' and look for discrepancies—you may be able to appeal it
  • Schedule a walk-through of your property with an assessor to confirm that its assessed value is accurate
  • Check with your accountant to see if you qualify for any tax credits or exemptions
  • Wait until after your next property value assessment to make major home improvements

Homeowners Insurance

Most mortgage lenders require homeowners insurance, which protects you if a covered event damages or destroys your property or belongings. This type of insurance also provides some degree of liability coverage in the event someone gets hurt on your property. Costs vary by state, but a recent National Association of Insurance Commissioners report found the average annual premium for a common homeowners insurance policy in 2018 was $1,249.

Insurers generally charge higher premiums if there's a greater perceived risk of you filing a claim. For this reason, folks who live in areas that are prone to adverse weather events will likely pay more. Here are some potential ways to save:

  • Compare rates with different insurers to find a better deal
  • Increase your deductible
  • Improve your credit—depending on where you live, insurers may use a credit-based insurance score to determine your premium

Mortgage Insurance

If your down payment is less than 20%, you'll likely have to pay for mortgage insurance. This amount is typically included in the monthly mortgage payment. It's referred to as private mortgage insurance (PMI) if you have a conventional home loan. The annual cost is usually somewhere between 0.5% and 2% of your total loan. The good news is that you can drop PMI once you hit 20% to 22% equity.

Mortgage insurance could also be required for loans that are guaranteed by the federal government, though costs are structured differently and the policy may be required for the life of the loan. They may also require an upfront fee.

You could avoid mortgage insurance by making a larger down payment or opting for a less expensive home loan. Getting a new appraisal or refinancing your mortgage are two other ways to potentially increase your equity or get rid of mortgage insurance on an existing loan.

Homeowners Association (HOA) Fees

Depending on the community you move into, you may have to pay HOA fees. This money is typically put toward the upkeep of the neighborhood—like maintaining streets, a shared swimming pool or managing community landscaping. A portion of the fee is generally funneled to a neighborhood reserve fund to cover unexpected expenses.

Every community provides different amenities, but the monthly HOA fee for a single-family home is often between $200 and $300, according to One potential way to reduce this cost is to connect with the HOA board. They may be open to deferring nonessential repairs, reducing reserve funds or rejecting rate increases.

Renovation Costs & Home Maintenance

If the roof leaks or an appliance acts up when you're renting, a quick call to the landlord is usually where your responsibility ends—not so for homeowners. Some experts suggest setting aside 1% to 4% of your home's value per year for regular maintenance and repairs, though you may need more during your first months and years as a homeowner if you're buying property that needs significant work.

To save money, try to plan ahead for the routine upkeep you expect your property to require. This can include lawn care, plumbing and electrical repairs, and pest control to name a few common costs. Shop around to see which contractors can give you the best deal for these types of regular expenses. Staying on top of these things can also prevent larger, more expensive problems down the road. You can also try your hand at DIY repairs and maintain positive relationships with handy professionals who may offer you a loyalty discount for repeat service.


Once you get into your home, you'll need to fill the space. The average new homebuyer spends $3,778 on furnishings during the first year, according to a 2017 survey conducted by the National Association of Home Buyers. Of course, this figure can be much higher depending on your tastes, desires and the size of your home. Furnishing every room of a large home with new, high-quality furniture could easily carry much more significant costs.

There are a few different ways to save money on furniture. You can opt for secondhand furniture pieces or get a no-interest financing deal from a local furniture store. It could translate to big savings if you can pay off your balance within that time period. A 0% intro APR credit card is another way to pay off furniture over time without paying interest. You can also buy things gradually and take advantage of seasonal sales.

The Bottom Line

There are plenty of extra costs to consider when buying a home. On top of preparing for the costs you expect to pay, it's a good idea to bulk up your emergency fund to have a safety net if anything unexpected arises once you move into your new home. If you do need to finance some home projects, having strong credit can help you save on interest costs. If need be, you may want to take the time to improve your credit before making any major financial decisions. Get a head start by checking your credit score and credit report for free with Experian.