How Much Cash Do I Need?

While 100% conventional financing is pretty much a thing of the past, FHA offers 3% down financing, and coupled with down payment assistance programs such as Nehemiah, 100% financing is still a possibility. Regardless of your financing, however, you will need some cash at various stages of the buying process described below.

If you’re a first-time home buyer, be sure to see Stop paying rent. Check out What about financing? for financing options and ideas about where to find additional cash.

Earnest money

When you find a home you want to own you will present an offer to buy it. You will include an earnest money check of about 1-2% of the purchase price with the Purchase Agreement as a deposit on your purchase.

Home inspection

You have the option of having a private home inspection before making a final decision on the purchase of a home. If you use a professional home inspector you should budget about $350 to be paid at the time of inspection, usually within 3-5 days of acceptance of the purchase agreement.

Appraisal

As part of your underwriting process, your mortgage company will order a professional appraisal to verify that its value is at least what you are paying for the property. Budget about $325 - $425 for this cost, usually payable prior to the appraisal.

Homeowner’s insurance

You must pay for your first year’s homeowner’s insurance prior to closing. Allow approximately 0.03% of the purchase price for this expense if you are purchasing a single family home. (If you are purchasing a townhome or condo, it is usually included in your association fee.) Typically your monthly mortgage payments will include an amount to be escrowed for future insurance payments to be made on your behalf by your mortgage company.

Down payment

A traditional down payment is 20% of the purchase price of your home, the amount required to avoid paying mortgage insurance with conventional financing.Whatever your financing arrangement, usually a minimum of 3%, your down payment is due when you close on your home purchase, usually 1-2 months after your Purchase Agreement is signed and accepted.

Closing costs

There are many steps to get you from a signed Purchase Agreement to actually owning your home. These steps are covered by closing costs. Budget about 3.5% - 4.5% of the loan amount for this expense. Typically up to 3% of closing costs can be financed with your mortgage.

Example of minimum cash required

Let’s estimate, for example, the cash you might need if you bought a house for $193,000 with 3% down and financed your closing costs.

The information below is for illustrative purposes only. Although calculations are believed to be reliable, they are based on certain assumptions whose accuracy cannot be guaranteed. Speak with a mortgage lender to find the best financing options for your unique situation and to receive a Good Faith Estimate.

If you’re a first-time home buyer, be sure to see Stop Paying Rent. Check out What about Financing? for financing options and ideas about where to find additional cash.