Money & costs · The buying process
How much money do you need to buy a house?
Less than almost everyone thinks. On a typical U.S. home, a buyer using a low-down-payment loan needs roughly $25,000–$40,000 in cash, not the $86,000 a 20% down payment implies. Here is the real 2026 math — the cash to get in, the income to qualify, and how long it takes to save.
Last updated June 2026
The short version
What it really costs to buy a house
There are two money questions when you buy a home, and they’re different. The first is how much cash you need upfront — your down payment, closing costs, and a reserve. The second is how much income you need to qualify for the monthly payment. Most people overestimate the first and underestimate the second.
Here are the 2026 anchors. The median existing-home price is about $429,300 (National Association of Realtors), and the average 30-year fixed mortgage rate is around 6.5% (Freddie Mac). On a home at that price, a first-time buyer with a 3–5% down loan realistically needs $25,000 to $40,000 all-in, and an income somewhere around $107,000 to $120,000 to comfortably carry the payment.
The single biggest myth is that you need 20% down. You don’t — most buyers put down far less, and some loans require nothing. This page breaks the cash into its three parts: the down payment, closing costs, and the income needed. For the full step-by-step process, see the complete guide to buying a house.
The cash to get in
The total cash you need upfront
Four buckets, not one. The down payment gets the attention, but it’s only the first.
Buying a home takes cash in four places: the down payment, closing costs, the cash reserves a lender wants to see you still have after closing, and the moving and setup costs nobody budgets for. The down payment is the big lever — and where the 20% myth costs people years of waiting.
Down payment on a $430,000 home, by tier
3% (conventional minimum) — $12,900 · 3.5% (FHA) — $15,050 · 5% — $21,500 · 10% (the first-time buyer median) — $43,000 · 20% (avoids mortgage insurance) — $86,000.
The gap between 3% and 20% is the difference between $12,900 and $86,000 — on the same house. That’s why the “20%” assumption pushes so many buyers out of the market who could actually afford to be in it.
On top of the down payment, plan for closing costs of roughly $8,600–$17,200 on a $430,000 home (about 2–4%, including prepaid taxes and insurance), and a cash reserve. Lenders may require anywhere from zero to six months of payments in reserve depending on the loan and property type — a single-family primary residence often has no minimum — but a sensible personal cushion is three to six months regardless. Add $2,000–$5,000+ for movers, deposits, and immediate needs.
The bottom line
A first-time buyer using a 3–5% down loan on a median-priced home realistically needs about $25,000 to $40,000 all-in — down payment, closing costs, and a modest cushion. Putting a full 20% down would push the all-in figure closer to $95,000–$105,000. Same house, very different starting line — which is the whole point of low-down-payment loans and down payment assistance.
Sub-topic
The down payment
The number wrapped in the most myths — and the one with the most help available.
Most buyers put down far less than 20%. According to NAR’s 2025 data, the median down payment was 10% for first-time buyers (the highest since 1989) and 23% for repeat buyers (who are usually rolling equity from a previous home into the next one). Repeat buyers are also increasingly paying all cash — a record 26% of all buyers, and 30% of repeat buyers, bought without a mortgage at all. First-time buyers funded their down payments mostly from savings (59%), then retirement and investment accounts (26%), and gifts or loans from family (22%).
Minimum down payment by loan type
Conventional — as little as 3% down (Fannie Mae HomeReady / Freddie Mac Home Possible, with income limits); 5% is common otherwise. FHA — 3.5% with a 580+ credit score (10% if 500–579). VA (eligible veterans and service members) and USDA (eligible rural and suburban areas) — 0% down. Jumbo (loans above the 2026 conforming limit of $832,750) — typically 10–20%.
Down payment assistance is real — and underused
As of early 2026 there were about 2,679 homebuyer assistance programs nationwide, most run by state and local housing finance agencies, with an average benefit around $18,000. They come as grants (free money), forgivable second loans, or low-interest seconds, and many state programs cover 3–5% of the purchase price. The catch isn’t availability — it’s awareness: roughly a third of buyers don’t know these programs exist. Gift funds from family are also allowed on most loans. Buying with little or no money down →
The mortgage insurance tradeoff
Put down less than 20% on a conventional loan and you’ll pay private mortgage insurance (PMI) — roughly 0.3%–1.5% of the loan per year, depending on your credit. The upside: you can request to cancel it at 20% equity, and by law it falls off automatically at 22%. FHA loans charge mortgage insurance differently — an upfront 1.75% plus about 0.55% a year — and if you put down less than 10%, it lasts the life of the loan unless you refinance. That’s why a buyer with a 620+ score and 5% down often does better with a conventional loan. More on down payments →
Sub-topic
Closing costs
The fees to finalize the loan and transfer the home — separate from your down payment.
Closing costs typically run 2% to 5% of the purchase price. National averages vary by how they’re measured — one 2025 industry figure puts the average purchase closing cost around $4,500 (excluding agent commissions and prepaid items), while figures that include transfer taxes and prepaids run higher. On a $430,000 home, a realistic all-in budget once you add prepaid taxes, insurance, and escrow funding is roughly $8,600 to $17,200.
What’s actually in your closing costs
A mix of lender fees (origination, 0–1.5% of the loan), third-party services (appraisal $300–$700, inspection $300–$500, title search and title insurance $500–$3,500, credit report, recording, survey, attorney in some states), and prepaids — the property taxes, homeowners insurance, and mortgage interest you pre-fund, plus an escrow account seeded with 2–6 months of taxes and insurance. Discount points, to buy down your rate, are optional.
Costs vary widely by state, mostly because of transfer taxes. High-cost states include Washington, D.C., New York, and Delaware (Delaware’s can approach 3% of the price), while states with no transfer tax — like Missouri, Iowa, and South Dakota — are among the cheapest. You can lower the bill by comparing Loan Estimates from at least three lenders, shopping for title and settlement services, asking for seller concessions, or taking a lender credit in exchange for a slightly higher rate.
“Closing costs” vs. “cash to close”
They’re not the same. Closing costs are the fees. Cash to close is the final amount you actually wire on closing day: your down payment plus closing costs, minus your earnest money deposit and any lender or seller credits. Your Loan Estimate gives you an early figure; the Closing Disclosure gives you the exact one, at least three business days before you sign. More on closing costs →
★ Free expert help
Not sure what your real number is?
A local lender can run your actual down payment, closing costs, and monthly payment — and check which down payment assistance programs you qualify for. Free, with no obligation.
Sub-topic
The income you need to qualify
Lenders don’t approve a price — they approve a monthly payment your income can carry.
The classic guideline is the 28/36 rule: keep your housing payment under about 28% of gross monthly income, and your total debt under about 36%. In practice, automated underwriting routinely approves higher — many conventional loans go to 45–50%, and FHA can stretch further with strong credit and reserves — but the 28% line is a good comfort target. To afford a median-priced (~$430,000) home in 2026, recent analyses put the income needed at roughly $107,000 to $120,000, depending on how much you put down. For context, the U.S. median household income is about $83,730, which is exactly why affordability is so stretched — though the income required has actually eased slightly over the past year.
Qualify on PITI, not just principal and interest
Lenders calculate your payment as PITI — principal, interest, property taxes, and homeowners insurance — plus PMI and any HOA dues. A mortgage calculator that shows only principal and interest can understate the real monthly payment by $600–$900 or more, which is why buyers routinely overestimate what they can afford. Always run your true PITI before you shop.
What counts as debt (and what doesn’t)
Your debt-to-income ratio counts car loans, student loans, credit card minimums, personal loans, and child support or alimony. It does not count utilities, your phone bill, groceries, or homeowners insurance and property taxes — those last two are already inside your PITI. Every $100 of monthly debt you carry can cut roughly $15,000–$20,000 off the price you qualify for, so paying down a card or a car loan before applying can matter more than a bigger down payment. Your credit score is the other big lever: a higher score lowers your rate and your PMI, which lowers the income you need. More on the income needed →
The timeline
How long it takes to save
Longer than it used to, but there are real ways to shorten it.
By one 2025 analysis, the typical U.S. household now needs about seven years to save a standard down payment — down from a peak of roughly 12 years in 2022, but still about double the pre-pandemic norm of three to four years. The reason is simple: the typical down payment more than doubled from about $13,900 in 2019 to $30,400 in 2025 as prices outran savings. The number also swings enormously by metro — from a little over a year in affordable Southern and Midwestern markets (and many military/VA towns) to more than 36 years in San Francisco and San Jose, where a typical down payment can exceed a full year’s income.
How to get there faster
The fastest levers aren’t about saving harder — they’re about needing less. A lower-down-payment loan (3–3.5% instead of 20%) can cut years off the timeline. Down payment assistance and gift funds reduce the cash you have to save yourself. A better credit score lowers your rate, payment, and the income you need to qualify. And keeping your savings in a high-yield savings account rather than a checking account quietly speeds the whole thing up. The first-time buyer guide →
Go deeper
The money topics in detail
Each piece of the cash puzzle has its own full guide.
The cash to get in
Quick answers
How much money you need: common questions
How much money do you need to buy a house?
On a median-priced (~$430,000) home, a buyer using a 3–5% down loan realistically needs about $25,000–$40,000 all-in — down payment, closing costs, and a small cash cushion. That’s far less than the ~$86,000 a 20% down payment alone would require. See the down payment breakdown →
Do you really need 20% down?
No. A 20% down payment lets you skip mortgage insurance, but most buyers put down far less — a median of 10% for first-time buyers. Conventional loans start at 3% down, FHA at 3.5%, and VA and USDA at 0% for those who qualify. Explore low- and no-money options →
How much are closing costs?
Typically 2% to 5% of the purchase price — roughly $8,600–$17,200 on a $430,000 home once prepaid taxes, insurance, and escrow funding are included. They cover lender fees, title, the appraisal, and prepaids, and vary by state mainly because of transfer taxes. See the full closing-cost guide →
What income do you need to buy a house?
To afford the typical ~$430,000 home in 2026 at current rates, recent analyses put the income needed at roughly $107,000–$120,000, depending on your down payment and debts. The U.S. median household income is about $83,730, which is why affordability is stretched. See how lenders calculate it →
How much should you have saved before buying?
Enough for your down payment, closing costs, and ideally a reserve. Lenders may require zero to six months of payments in reserve depending on the loan and property type, but a sensible personal cushion is three to six months of expenses on top of your cash to close.
What is the 28/36 rule?
A common affordability guideline: keep your housing payment under about 28% of gross monthly income, and your total debt payments under about 36%. Many loans allow higher ratios — often 45–50% — but staying near 28% keeps your budget comfortable.
How long does it take to save for a down payment?
About seven years for a typical household as of 2025, down from a 12-year peak in 2022 but still roughly double the pre-pandemic norm. Using a lower-down-payment loan, down payment assistance, or gift funds can shorten it dramatically.
What is PMI and how much does it cost?
Private mortgage insurance is required on a conventional loan when you put down less than 20%, costing about 0.3%–1.5% of the loan per year. You can request to cancel it at 20% equity, and it ends automatically at 22%. FHA loans use a different, longer-lasting mortgage insurance.
Can you get help with the down payment?
Yes. There were about 2,679 down payment assistance programs nationwide in early 2026, with an average benefit near $18,000 — as grants, forgivable loans, or low-interest seconds. Most run through state or local housing agencies, and gift funds from family are allowed on most loans. See assistance programs →
★ Ready for the next step?
Find out exactly what you can afford.
Tell us where you are and we’ll connect you with an expert who can run your real numbers — the cash to close, the monthly payment, and the programs that lower both. It’s free, with no obligation.
Keep reading
More on the money
Go deeper on the part of the cost that matters most to you.