How Much Cash Do You Need to Buy a House?

In this post, we provide a brief outline of some of the up-front costs associated with buying a home.

Here’s a rundown of the outlays.

Earnest Money Deposit

After making an offer and coming to an agreement with the home seller, a buyer is generally expected to pay 1 to 3 percent of the purchase price immediately. This earnest money deposit is held until the closing when it becomes part of the down payment. If the buyer backs out of the deal unexpectedly, the seller keeps the money. If the deal falls through due to a contingency that was previously laid out, the buyer would get the money back. On a $425,000 home, the earnest money deposit would be between $4,250 and $12,750.

Home Inspection

The next outlay is generally the home inspection, which costs in the neighborhood of $300 to $600.

Down Payment

Your down payment will likely vary from between 3.5 percent of the purchase price, with an FHA-backed loan, to 20 percent. So, for a $425,000 home, you would need to put between $14,875 (3.5 percent) and $85,000 (20 percent) down. Down payments of greater than 20 percent are also an option and would lead, of course, to smaller mortgage payments and most likely, a lower interest rate.

Closing Costs

Closing costs typically range from 2 to 5 percent of the purchase price. Included in the sum are title insurance, loan-processing costs, taxes, and various other fees (a full rundown of the closing costs in DC can be found here). These costs are sometimes negotiable; in certain markets, an eager developer may defer closing costs.

For our $425,000 example, closing costs would range from $8,500 to $21,250.

Homeowner’s Insurance and Moving Costs

Every mortgage needs to be insured. The first annual premium is usually paid at closing. Be sure to also keep some cash on hand for moving costs, which will vary based on how large a place you are moving from and how much stuff you have.


By Shilpi Paul

This article originally published by UrbanTurf at