How Much Does It Really Cost to Buy a House? (Complete Breakdown)
Buying a house costs more than the down payment. On a $400,000 home with a 5% down payment, a buyer needs roughly $20,000 for the down payment plus $8,000 to $20,000 in closing costs plus prepaid expenses, for a total cash needed at closing of $30,000 to $45,000 before moving costs. Understanding every line item removes the surprises that derail closings.
Key facts
- Down payment
- 0% to 20% of purchase price
- Closing costs
- 2% to 5% of loan amount
- Prepaid expenses
- Insurance + tax escrow + interest
- Inspection
- $300 to $600
| Cost | Typical Amount | Notes |
|---|---|---|
| Down payment | 0% to 20% of purchase price | VA/USDA: 0%, FHA: 3.5%, Conventional: 3% to 20% |
| Origination fee | 0.5% to 1% of loan | Negotiable |
| Appraisal | $400 to $700 | Required by lender |
| Title insurance (lender) | $500 to $1,500 | Required |
| Title insurance (owner) | $500 to $1,500 | Optional but recommended |
| Title search | $75 to $200 | Required |
| Recording fees | $25 to $250 | Set by county |
| Prepaid interest | Varies | Days from closing to month end |
| Homeowners insurance (1 yr) | $800 to $2,500 | Required |
| Property tax escrow (2-3 mo) | Varies | Depends on local tax rate |
| Home inspection | $300 to $600 | Not required but strongly recommended |
Source: Industry standard ranges. Actual costs vary by location, lender, and transaction.
The Upfront Costs: What You Need at Closing
Cash to close is the down payment plus closing costs plus prepaid expenses, minus any lender credits or seller concessions. On a $400,000 home with 5% down, the down payment alone is $20,000. Closing costs typically add another $8,000 to $20,000 depending on lender fees, title costs, and local recording charges.
Down Payment: How Much Do You Really Need?
Down payment requirements vary by program. VA and USDA loans require 0% down for eligible borrowers and properties. FHA requires 3.5% with a 580 credit score. Conventional 97 allows 3% down for first-time buyers; standard conventional starts at 5%. Putting 20% down on conventional eliminates PMI.
Lower down payments are not automatically worse. The right down payment depends on cash reserves, target monthly payment, and whether you can avoid PMI. A good loan officer will run the side-by-side math before you decide.
Closing Costs: What Each Fee Covers
Closing costs are the fees charged by the lender, title company, and government to originate, document, and record the loan. Total closing costs typically run 2% to 5% of the loan amount. The largest line items are origination, title insurance, and prepaid escrows.
Every cost shows up on the Loan Estimate and again on the Closing Disclosure. Compare the Loan Estimates from at least two lenders before choosing. Title and escrow fees are also shoppable in most states.
Prepaid Expenses: What You Pay in Advance
Prepaid expenses are not lender fees. They are amounts you pay in advance for items the lender requires to be funded at closing: a full year of homeowners insurance, 2 to 3 months of property tax escrow, and prepaid interest covering the days between closing and the first full month of payments.
Prepaids are often the line item that surprises borrowers because the total can run $3,000 to $8,000 or more depending on property tax rate and insurance premium. They are not avoidable, but you can reduce prepaid interest by closing late in the month.
The Ongoing Monthly Costs of Homeownership
Monthly housing cost is more than principal and interest. PITI (principal, interest, taxes, insurance) is the standard mortgage payment. Add HOA dues if applicable, PMI if the down payment is below 20% on a conventional loan, and a maintenance reserve of roughly 1% of home value per year.
How to Reduce the Cash You Need at Closing
Three real levers: seller concessions (negotiated into the purchase contract, capped by loan program), lender credits (a higher rate in exchange for the lender paying some closing costs), and down payment assistance programs available through many state housing finance agencies.
On a refinance, closing costs can sometimes be rolled into the new loan. On a purchase, they generally cannot, though seller concessions and lender credits can dramatically reduce the cash you bring to the table.
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Frequently asked
How much money do I need to buy a house?
Plan for the down payment (0% to 20% depending on program) plus 2% to 5% of the loan amount in closing costs plus prepaid expenses (insurance, tax escrow, interest). On a $400,000 home with 5% down, total cash needed at closing is typically $30,000 to $45,000.
What are typical closing costs when buying a home?
Closing costs typically run 2% to 5% of the loan amount. The largest items are origination fees, title insurance, appraisal, title search, recording fees, and prepaid escrows for homeowners insurance and property taxes.
Can closing costs be rolled into the mortgage?
On a refinance, yes, in most cases. On a purchase, closing costs generally cannot be rolled into the loan, but seller concessions, lender credits, and down payment assistance programs can significantly reduce the cash needed at closing.
What are the ongoing monthly costs of homeownership?
Principal and interest, property taxes, homeowners insurance, HOA dues if applicable, PMI if your down payment is under 20% on conventional, and a maintenance reserve of about 1% of home value per year. Together these define your true monthly housing cost.
What are the hidden costs of buying a house that buyers miss?
Home inspection, moving expenses, immediate repairs from inspection, utility deposits, window treatments and basic furnishings, and the ongoing maintenance reserve. Most first-time buyers underbudget maintenance in the first year.
Cost ranges are typical industry estimates and vary significantly by location, lender, loan type, and transaction. Not a commitment to lend. Encompass Lending Group, LP NMLS #292897. Equal Housing Opportunity.
