How much cash do I really need to buy a house?

Short answer: budget for the down payment plus 3–6% more

Most first-time buyers plan for the down payment and get blindsided by everything else.

A realistic total on a $350,000 purchase with 5% down looks like this:

• Down payment: $17,500
• Closing costs (lender fees, title, appraisal, recording): $7,000–$12,000
• Prepaid taxes and insurance to fund the escrow account: $2,500–$4,500
• Home inspection and any specialty inspections: $400–$900
• Earnest money deposit: paid early, then credited back to you at closing

Cash to close: roughly $28,000–$35,000, not $17,500.

On top of that, lenders want to see reserves — money still in your accounts after closing — and you'll want cash for moving, utility deposits, and the first round of things the house needs.

The planning rule: down payment plus another 3–6% of the purchase price, then a separate cushion you don't spend.

Closing costs, line by line

Closing costs generally run 2–5% of the purchase price and split into three buckets.

Lender fees — what the lender charges to make the loan: - Origination or underwriting fee, typically $900–$1,800 - Appraisal, $500–$900 depending on the market and property type - Credit report and verification fees, usually under $150 - Discount points, if you choose to buy the rate down — each point is 1% of the loan amount

Third-party fees — services the lender requires: - Title search and lender's title insurance - Owner's title insurance, optional in most states but strongly recommended - Settlement or escrow agent fee - Survey, where required - Recording fees and, in some states, transfer taxes

Prepaids and escrow setup — not really "costs," but real cash you bring: - Homeowners insurance, first full year paid upfront - Property taxes, several months collected in advance to seed the escrow account - Prepaid interest from your closing date to the end of that month - Sometimes the first year of HOA (homeowners association — a neighborhood or condo group that charges a monthly or yearly fee and sets community rules; lenders count that fee in your payment) dues or a capitalization fee

Who pays what varies by state and by what you negotiate. In some markets the seller customarily covers title insurance; in others the buyer does. Your [closing cost calculator](/closing-cost-calculator) will estimate your area, and the Loan Estimate you receive within three business days of applying gives you the lender's actual numbers.

Earnest money: what it is and whether you get it back

Earnest money is a deposit — typically 1–3% of the purchase price — that you put up when your offer is accepted, to show the seller you're serious. It goes into an escrow account held by a neutral third party, not to the seller.

At closing, it's credited toward your down payment and closing costs. It is not an extra cost; it is the same money, paid earlier.

You get it back if you walk away for a reason protected by a contingency in your contract — a failed inspection within the inspection period, a low appraisal, or a financing denial while your loan contingency is active. You typically lose it if you walk away after those windows close, or simply change your mind.

The cash-flow implication matters: earnest money is due within a few days of acceptance, weeks before closing. You need it liquid and available, not tied up in a retirement account.

Our [earnest money guide](/guides/earnest-money) covers the contingency rules in detail.

Reserves: the cash you keep, not the cash you spend

Reserves are the money left in your accounts *after* you've paid everything at closing, measured in months of your new housing payment.

Why they matter: reserves are one of the strongest compensating factors in underwriting. A borrower with a modest credit score and six months of reserves often gets approved where a borrower with better credit and nothing left over does not.

What counts: - Checking and savings balances - Vested retirement accounts, usually counted at 60–70% of the balance to account for taxes and penalties - Stocks and mutual funds, typically discounted similarly

What doesn't: - Money that's already been committed to closing - Gift funds, on many programs, once the closing is covered

Requirements vary: many conventional loans on a primary residence require none at all, while manually underwritten files, multi-unit properties, and higher-debt files often require two to six months. But even when zero is allowed, having reserves changes how an underwriter reads the rest of your file — and it's how you handle the water heater that fails in month three.

The costs nobody puts in the spreadsheet

These fall outside the closing statement, which is exactly why they surprise people.

• Inspections: a general home inspection runs $400–$700. Add $150–$400 each for sewer scope, radon, pest, or structural specialists. You pay these out of pocket, before closing, and you pay them again if the first deal falls through.
• Moving: $500 for a truck and friends, $2,000–$5,000 for professional movers.
• Utility deposits and setup: $100–$500, more if you have thin credit history with the utility.
• Immediate repairs: the things the inspection found that the seller didn't fix.
• Furnishing an empty house: window coverings alone are often $1,000+, and they are not optional on day one.
• The first maintenance surprise: budget roughly 1% of the home's value per year for upkeep. It doesn't arrive evenly, and year one is frequently front-loaded.

A reasonable post-closing cushion for a first home is $3,000–$8,000 beyond your reserves.

Legitimate ways to reduce your cash to close

There are four real levers, and they stack.

1. Seller concessions. The seller agrees to pay part of your closing costs, usually in exchange for a slightly higher price. Programs cap how much: conventional loans allow 3% with less than 10% down (rising with a larger down payment), FHA (Federal Housing Administration loan — a government-backed loan built for buyers with lower credit scores or smaller down payments) allows up to 6%. This is the single largest lever available and it's negotiated in your offer.

2. Lender credits. You accept a slightly higher interest rate and the lender pays part of your closing costs. This is the mirror image of buying points. It's a good trade when you're short on cash today, or when you expect to refinance or move within a few years.

3. Down payment assistance. Grants and second-mortgage programs exist in every state, and many cover closing costs as well as the down payment. Income limits usually apply. See the [down payment assistance guide](/guides/down-payment-assistance-explained).

4. Gift funds. Allowed on all major programs for both the down payment and closing costs, with a gift letter and a documented transfer.

What is not a lever: rolling closing costs into the loan. On a purchase you generally cannot finance closing costs the way you can on a refinance. What you can do is take a lender credit or a seller concession — which achieves the same thing through the front door.

How to know your real number before you shop

Three documents get you from an estimate to a fact.

The Loan Estimate. Within three business days of applying, the lender must send you a standardized three-page form showing your rate, monthly payment, closing costs, and estimated cash to close. Because the format is identical across lenders, it's the only accurate way to compare offers. Get one from at least two lenders.

The Closing Disclosure. At least three business days before closing you receive the final version, with exact numbers. Compare it line by line against your Loan Estimate — certain fees are legally not allowed to increase, and others are limited to a 10% total variance. See our [closing disclosure guide](/guides/closing-disclosure).

Your own worksheet. Down payment, plus 3–6% for closing costs and prepaids, plus inspections, plus moving, plus a cushion.

And time your money: earnest money is due within days of your offer being accepted, inspections a week or two later, and the balance by wire the day before closing. Money in a retirement account or a CD (Closing Disclosure — the final five-page form showing your exact loan terms and cash needed, delivered at least three days before you sign) needs to be liquid well before then.