How Much Money Do I Need to Buy a House?

Start saving now for the home of your dreams.

Purchasing a home will require that you save some money to show lenders that you are financially stable and responsible. Decide what kind of property you want and how much you can afford to pay. Based on this information, you can determine how much money you will need for the down payment.

Loan Approval

Banks typically approve loans only to people who have a stable work history with at least two years at the same job. The borrower's annual family income should be around one-third to one-half of what the home costs. This means you should stick with the job you have and possibly take an extra job on the weekend to qualify for a more expensive home.

Down Payment

Lenders usually expect a buyer to have saved a down payment in the range of 20 to 30 percent. This means that to purchase a $100,000 home, you will need $20,000 cash saved up which you can use for the down payment. If you make a larger down payment, you typically will have a lower monthly mortgage payment.

Closing Costs

Closing costs average around three to six percent of the total cost of the home (see Reference 1). For a $100,000 house, you will need approximately $5,000 in closing costs. Your lender can help you estimate your closing costs after you have completed your mortgage application.

References

• Community Corner: Buying a Home