Buying a home may be more affordable than you think. Here’s how to estimate your down payment, closing costs, and the savings you’ll need to take the next step toward homeownership.
One of the biggest questions prospective homebuyers ask is, “How much money do I actually need to buy a house?”
It’s a great question, and the answer may surprise you.
Many buyers assume they need to save 20% of a home’s purchase price before they can qualify for a mortgage. While a larger down payment can offer certain financial advantages, you don’t necessarily need 20% down to become a homeowner. In fact, some mortgage programs allow qualified buyers to put down as little as 3%, and certain programs offer no down payment requirements at all.
At BankSouth Mortgage, we believe understanding your options is one of the most important steps toward buying a home with confidence.
Let’s break down the costs, explore your financing options, and help you determine how much money you may need.
Your down payment is the portion of the home’s purchase price that you pay upfront. The remaining amount is typically financed through your mortgage.
The amount you’ll need depends on several factors, including the type of mortgage you choose, your financial qualifications, and the property you’re purchasing.
Here’s a look at common mortgage options:
Conventional mortgages offer flexible financing options, including programs with down payments as low as 3% for qualifying borrowers. These loans can be a good fit for buyers with established credit who want flexibility in their mortgage options.
Backed by the Federal Housing Administration, FHA loans offer down payment options starting at 3.5% for eligible borrowers with qualifying credit scores. They may be especially helpful for first-time buyers or those seeking more flexible qualification guidelines.
Eligible veterans, active-duty service members, and certain surviving spouses may qualify for VA financing with no down payment required. VA loans also typically do not require monthly mortgage insurance.
For qualified buyers purchasing eligible homes in designated rural areas, USDA loans may offer 100% financing. Income, location, and other eligibility requirements apply.
The takeaway: Your down payment doesn’t have to be the barrier that keeps you from exploring homeownership. The right loan program can make a meaningful difference in how much money you need upfront.
Your down payment is only one part of the money you’ll need to purchase a home.
Closing costs are the expenses associated with finalizing your mortgage and transferring ownership of the property. These costs generally range from approximately 2% to 5% of the home’s purchase price, although your actual expenses may vary.
Closing costs may include:
For example, if you’re purchasing a $350,000 home, closing costs estimated at 3% would equal approximately $10,500.
The good news? Depending on your mortgage program and purchase agreement, there may be opportunities to reduce your out-of-pocket costs through seller concessions, lender credits, or eligible assistance programs.
A BankSouth Mortgage loan officer can help you estimate these expenses early in the process so you have a clearer picture of what to expect.
Let’s put the numbers into perspective.
The following examples assume a 3% down payment and estimated closing costs of 3% of the purchase price.
These examples are for educational purposes only and assume eligibility for a 3% down payment mortgage. Actual closing costs, loan requirements, prepaid expenses, and cash needed may vary. Examples do not include additional savings or reserves.
As you can see, a buyer purchasing a $400,000 home could potentially need around $24,000 for the down payment and estimated closing costs, rather than the $80,000 down payment often associated with the traditional 20% approach.
That difference could bring your homeownership plans closer than you expected.
Possibly! And this is where understanding available assistance programs becomes especially valuable.
Many homebuyers aren’t aware that down payment assistance programs may help eligible borrowers cover a portion of their initial homebuying expenses.
At BankSouth Mortgage, our ReadyAssist resources help qualified homebuyers explore programs designed to reduce upfront financial barriers.
Depending on your eligibility, these may include:
