How much money do you need to buy a house?

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Most people are wondering just exactly how much money do I need to buy a house with. The general rule of thumb is you should spend roughly 30% of your take-home pay on your housing costs which includes the mortgage, the property tax and insurance. This is what the banks are looking for.  I recommend you first contact a local Realtor® as they will provide you with the best up to date home buying resources. See the top agents I recommend below this article.


As far as buying a house, you should roughly spend four times your salary on a house. For example, if I'm making $50,000 what could I afford? You multiply your salary times four and that's generally what you can qualify for assuming you have a 20% down payment. If you're making $50,000 you can assume you can afford a $200,000 home. Below is just a general guideline you can use. Like I mentioned before get with a local real estate agent in the home buying process.


Here's how much money you need to buy a house

Salary Per Year Price of House Closing Costs ( 3% ) Downpayment ( 10% ) Total Cost
$30,000 / year salary $120,000   $3,600  $12,000 Downpayment $15,600
$40,000 / year salary $160,00 $4,800  $16,000 Downpayment $20,800
$50,000 / year salary $200,000 $7,200  $20,000 Downpayment $27,200
$60,000 / year salary $240,000  $3,600  $24,000 Downpayment $27,600
$70,000 / year salary $280,000  $8,400  $28,000 Downpayment $36,400
$80,000 / year salary $320,000   $9,600  $32,000 Downpayment $41,600
$90,000 / year salary $360,000   $10,800  $36,000 Downpayment $46,800
$100,000 / year salary $400,000   $12,000  $40,000 Downpayment $52,000










The above chart is a general reference guideline cost to buy a house. Private Mortgage Insurance is not included/  Please consult a local Realtor and their lender for more accurate quote. The example above states a 10% downpayment, Private Mortgage Insurance figure will need to be added. Putting down 20% or more will remove the Private Mortgage Insurance.


Downpayment on a house

Usually one of the first things people want to know other than whether or not they can afford the monthly payment is how much money are they going to need to have to bring to the table to get into this house? You hear about loans with 5%, 3.5% or even 0% down. Someone might say well I can do that. But before jumping in with both feet let's take a look for a second as far to what other things you have to come up with going into this transaction.


Take a $200,000 purchase for example and let's just say we're going to put 5% down payment. Now a mathematician might quickly say oh that's $10,000 that's easy. I can get a house, that was easy. A more savvy buyer might say well I've got to think about closing costs. They would be correct. Closing costs including lender fees, escrow, title, notary, appraisal and inspection. All that that could be anywhere from 2,000 to 5,000 dollars on a $200,000 house.



Prepaid Expenses when buying a house

The last thing that people will commonly forget about are the prepaid expenses. Those are reoccurring fees such as property taxes, homeowners insurance, sometimes private mortgage insurance or PMI. These are fees that usually your lender requires three to six months in advance payment. So you usually have to come up with say $600 to 1000 of homeowner insurance on a $200,000 purchase.


That might be $2000-$3000 of property taxes and if there's PMI they usually need about one month of mortgage insurance PMI upfront. So when you add all that up together that could be anywhere from $3000-$6000. So let's take a look for a second we have $10,000 down payment. We have $2000-$5000 of closing cost and we have another $3000-$6000 of prepaid expenses. When you add all that up together that's somewhere between $15,000-$21,000 down payment. Quite a big difference from someone that was thinking they were coming to the table with $10,000.

Now I don't want to discourage you and make you think oh I'm never going to be able to buy a house. But this is something that you really want to look at well in advance before going out and shopping. You want to make sure you have enough cash to be able to come to close. Not just the down payment. Have a little left over if you need to fix up the house a little bit.

How to Fiscally Plan to Buy A House

A great way to plan and save for that down payment is to take the what your new mortgage payment would be and subtract how much you're paying currently in rent. Take that extra money and put it aside for a few months.


You're going to be able to save several thousand dollars over the next several months. It will get you used to not having that money get you used to making that new mortgage payment. That way you can actually see if you're going to have to adjust your purchase price or maybe put more money down to get that monthly mortgage payment more comfortable for you.

There are many loan programs out there that require less down payment there's programs for teachers for veterans and even for the general community.


Contact the Top Local real estate agents for your area. Link is below for their contact.

For Plano, Texas market I recommend Susie Kay 

For Baltimore, MD I recommend Margaret Rome, Baltimore Maryland 

For the Maui, Hawaii area I recommend Steven Nickens 

For the Colorado Springs, CO market I recommend Sondra Meyer: 

For the Tahoe City, CA market I recommend Laura Allen, Lake Tahoe - Truckee Real Estate for Sale 

For the Phoenix, AZ market I recommend Anna Banana Kruchten CRB, CRS 602-380-4886 

Charlotte, NC market I recommend Debe Maxwell, CRS 

For the Alexandria, VA market I recommend Amanda S. Davidson 

For the Sedona Arizona market I recommend Sheri Sperry - MCNE® 

For the Lewisburg, WV market I recommend Rebecca Gaujot, Realtor® 

If you need a specific agent for you area just let me know!


Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. . . 01/31/2019 03:35 PM
  2. Cecile Myers 02/10/2019 09:14 AM
Home Buying
home buying

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Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Peter,
Very nice of you to post a link to some great agents in different markets across the country.  We have an abundance of very competent agents on the AR platform.

Jan 31, 2019 03:01 PM #1
Margaret Rome, Baltimore Maryland
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome


Peter Mark 

Many people forget about those darn closing costs. Thanks for the mention!


My favorite line in your post...

'A great way to plan and save for that down payment is to take the what your new mortgage payment would be and subtract how much you're paying currently in rent. Take that extra money and put it aside for a few months.'

Jan 31, 2019 04:19 PM #2
Susie Kay
Ultima Real Estate - Plano, TX
North Dallas Specialist

Thank you Peter Mark for such an informative blog and the tag.

Feb 01, 2019 09:01 AM #3
Sondra Meyer:
Star View Real Estate - Colorado Springs, CO
See It. Experience It. Live It.

Peter, you have provided buyers with a lot of great information about how much money they are going to need when buying a house.   This is one of the most common questions that I get.    

I am honored that you listed  my name as the agent to help in the Colorado Springs area.   I try my best to help buyers find the house they are dreaming of and to make the closing process as smooth as possible.  

Best wishes.  

Feb 01, 2019 08:53 PM #4
Rebecca Gaujot, Realtor®
Vision Quest Realty - Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Peter, you provide good information for buyers who are thinking of purhasing a house. Thanks so much for the mention. I really appreciate it.

Feb 10, 2019 02:43 PM #5
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