The amount of money you’ll need up front to buy a house depends on a number of factors, but, in general, you’ll need to come up with enough money to cover these three costs:
Earnest money is a deposit you make when submitting your offer to prove to the seller that you’re serious about wanting to buy the home. The amount of earnest money required varies so ask your REALTOR® what is appropriate. Earnest money is put into an escrow account, and if your offer is accepted, it is applied to your down payment or closing costs.
Your down payment is a percentage of the cost of the home that you pay when the transaction closes. Down payment requirements vary based on the loan type, but expect to put down somewhere between 5 and 20% of the purchase price. Conventional loans typically require higher amounts while FHA and VA loans require very little down.
Lastly, closing costs are the costs associated with processing your loan and the other paperwork required to buy a house. Closing costs typically average between 2 and 5% of the purchase price. When you apply for a loan, your lender will give you an estimate of your closing costs.
