How Much Money Do You Need to Buy a House?

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When you buy a house, you will have to pay for several expenses in the process. This article breaks down the various expenses, when you have to pay, and the approximate amount. Here is a summary of the various costs:

Prior to Closing Estimate At Closing Estimate
Earnest Money Deposit ~1% Down Payment varies depending on the loan
Inspection Fee $300-$800 Closing Costs ~3%
Appraisal and Credit Check $600

Here is an example of buying a $400,000 home with a 20% down payment and paying 1% EMD

Prior to Closing Estimate At Closing Estimate
Earnest Money Deposit $4,000 Down Payment $80,000
Inspection Fee $500 Closing Costs $12,000
Appraisal and Credit Check $600
TOTAL $5,100 TOTAL $92,000*

* Remember that the $4,000 you put down as a deposit is credited to you at Closing, so you only need to bring $88,000.

Prior to Closing


At the time of making an offer, you have to put down a deposit called an Ernest Money Deposit (EMD), this is generally 1% of the Offer Price. For example, for a $435,000 offer, your EMD would be about $4,350 (you can put less or more, but this can affect your offer negatively or positively).

Your EMD is deposited within 5 days after the contract is ratified and placed in an Escrow Account. At closing, this money is credited back to you and you can apply it toward your closing costs or down payment.

In the event that the contract is voided, the Parties have to agree on how the fund is distributed. If the contract is voided using one of the Contingencies, money is normally returned to you. If the contract is voided and you are in Default, the Seller can try to keep the money.


After the contract is ratified, you want to do an inspection. This can include a home inspection, Radon testing, air quality test, lead-based paint test, and just about anything you want to inspect. Normally, the Buyer pays for the cost of the inspection to the inspector at the time of inspection.

A standard home inspection costs about $300 to $500 paid to the inspector.

Appraisal and Credit Check

If you decided to get a mortgage, the lender will require an appraisal and a credit check. You will pay for these items to the lender. These items usually cost about $500 to $600 combined.

For a cash purchase, you can opt-out of doing an appraisal and no credit check is required.

In total, your upfront expenses total is about $1,000 plus the EMD amount.

At Closing

At closing, there are two more expenses.

Down Payment

Depending on your loan type, you will contribute your down payment at closing. For example,

  • 0% for a VA loan and some other specialized loan products,
  • 3.5% for an FHA loan,
  • 5% or more for a Conventional loan, etc.

If you buy cash, you will pay for the entire amount of the agreed-upon Purchase Price.

Closing Costs

Second, you will pay for a long list of expenses which typically add up to about 3% or your Purchase Price. These expenses include.

  • Settlement charges
  • Taxes
  • Pro-rated HOA/Condo Fee
  • Pro-rated taxes

If you borrow money, you will also pay for:

  • Loan origination fee
  • Appraisal
  • Credit check
  • Lender’s title insurance
  • The first full year of homeowner’s insurance premium
  • Fund to set up an Escrow account
  • Funding fee (in case of VA loan or FHA loan)

Other miscellaneous fees include:

  • Home warranty
  • Termite inspection
  • Survey
  • Owner’s title insurance

For a cash transaction, your estimated closing costs total is about 2% of the Purchase Price (instead of the 3%)

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