A lot of people never actually ask me, “How much money do I need to buy a house?”
They’ve already answered the question themselves.
Usually with something along the lines of:
“I probably don’t have enough.”
Maybe they’ve heard they need 20% down. Maybe they think their credit has to be perfect. Maybe they still have a car payment, credit cards or student loans and assume they need to get rid of all of that before they can even think about buying.
Then there are closing costs.
They may not know exactly what those are either, but they know they cost money, so apparently we need another pile of cash for those too.
Before long, somebody who may actually have options has completely disqualified themselves without ever talking to a lender.
That’s the part I want to fix.
Not everyone is ready to buy a home today. But you might be closer than you think, and finding out is a whole lot better than assuming.
Myth #1: Do You Need 20% Down to Buy a House?
No. You do not automatically need 20% down.
There are loan programs that allow qualified buyers to purchase with considerably less than that, and there are also down payment assistance programs available for some buyers.
Does that mean putting less down is always the best choice?
Nope.
How much you put down can affect your monthly payment, mortgage insurance, cash reserves and other parts of the loan. That is why I would rather have you compare your actual options with a good lender than pick an arbitrary percentage because somebody told you 20% was “the rule.”
It isn’t.
And please don’t empty your entire savings account just because you technically can.
Owning a home is a whole lot more comfortable when you still have money left after closing. Houses have a funny way of eventually needing something.
Usually when you have just spent money on something else. 😂
Myth #2: Does Your Credit Have to Be Perfect to Buy a House?
No.
Your credit matters, but perfect credit is not a requirement for every mortgage program.
Different loan programs and lenders have different qualification standards, and your credit is only one part of the financial picture.
I’ve seen people assume they need to spend another year or two trying to reach some magical credit score before they even talk to a lender.
Sometimes improving your credit first absolutely makes sense.
But wouldn’t you rather know?
And here’s something else I want buyers to understand: a good lender is not going to be horrified if you’re not mortgage-ready yet.
That happens all the time.
A great lender will look at where you are now, explain what is helping or hurting you, and help you create a realistic path toward buying when it works for you.
Maybe that means improving your credit. Maybe it means paying down a particular debt. Maybe you need more time to save. Maybe there is something on your credit report that needs attention.
Whatever it is, you should leave that conversation knowing what the next steps are.
If a lender simply tells you, “Work on your credit,” and sends you on your way without explaining what that means or giving you useful direction, I’d find another lender.
A great lender should have your best interests at heart. They should want to help you make a smart decision now and hopefully still be your lender years from now when you buy again, refinance, or send somebody you care about their way.
I know several lenders I trust who approach buyers that way.
So if you find out you’re not ready today, that is not a failure.
It just means now you have information and a plan instead of an assumption.
Myth #3: Do You Need to Be Debt-Free Before Buying a Home?
Again, no.
Having debt does not automatically mean you cannot buy a home.
Lenders look at your overall financial situation, including your income and monthly debt obligations. That can include car payments, credit cards, personal loans and other recurring debts.
Being debt-free might be lovely.
So would winning Powerball.
Neither one is a prerequisite for talking to a lender. 😂
The important question is whether the numbers work for your situation and whether the resulting house payment fits comfortably into your life.
Myth #4: Can You Buy a House With Student Loans?
Student loans do not automatically prevent you from buying a home either.
They can affect how a lender calculates your monthly obligations and how much you may qualify to borrow, but having student loan debt does not mean homeownership is automatically off the table.
This is another one where people sometimes disqualify themselves before anyone has actually run the numbers.
Don’t do that.
Let the lender tell you how the student loans affect the calculation.
Then you can make a decision based on facts instead of mythology from the internet.
Or whatever AI happened to tell you that day. 😂
Myth #5: You Need a Huge Pile of Cash to Buy a House
This one deserves a little more explanation because there are expenses involved in buying a house.
But how much cash you need can vary tremendously from one transaction to another.
I had one buyer whose transaction is a great example.
She qualified for a THDA down payment assistance program, and we were also able to negotiate for the seller to pay allowable closing costs and prepaids.
When we got to closing, she did not have to bring cash to close.
Now, before anybody gets too excited, that is absolutely not what happens on every transaction.
Her loan program, her qualifications, the property, the contract we negotiated and the seller’s willingness to contribute all had to work together.
But I love her story because it shows exactly why I don’t want buyers assuming they cannot buy simply because they don’t have a giant pile of cash sitting in the bank.
Sometimes there are options you don’t know exist until you ask.
So What Money Might You Actually Need to Buy a House?
Even if your down payment is less than you expected, there are several other expenses buyers should understand.
Down Payment
Your down payment depends on your loan program and the financial strategy you choose with your lender.
The important thing is that 20% is not automatically the starting point.
Earnest Money
Once you go under contract, your purchase agreement will usually require you to make an earnest money deposit, often called EMD, within a certain number of days.
Think of earnest money as a good-faith deposit showing that you are serious about buying the property.
The amount can vary depending on the home, price point and terms of the offer.
If the transaction closes, that money is credited toward the funds you owe as part of the purchase.
So it isn’t another mystery expense floating off into the universe.
Home Inspection
Most buyers choose to have the home professionally inspected.
The inspection gives you a much better idea of the condition of the property and may uncover things that weren’t obvious while you were wandering through the house deciding where your sofa would go.
The inspection is generally paid by the buyer at the time it is performed, so this is usually money you need before closing.
And yes, sometimes the report comes back 47+ pages long and looks terrifying.
That does not necessarily mean the house is falling down.
A good inspector is supposed to point things out. My job is to help you sort through what is routine, what deserves attention and what may actually affect your decision about the house.
Appraisal
If you are financing the purchase, your lender will usually require an appraisal.
The appraisal helps the lender determine whether the property’s value supports the loan.
Depending on your lender and loan, the appraisal may be another expense you pay before closing or as part of the loan process.
Nobody gets particularly excited about paying for an appraisal, but there it is.
Closing Costs
Closing costs are separate from your down payment.
They may include lender fees, title-related costs, recording fees and other expenses associated with completing the transaction.
The amount varies depending on the loan, property and transaction.
This is why I would much rather have buyers get real numbers from a lender early instead of relying entirely on an online calculator.
Online calculators can be useful.
They can also have you convinced you’re either buying a mansion or living in your car.
Real numbers are better.
Prepaid Taxes and Insurance
You may also have prepaid expenses such as homeowners insurance and property taxes.
Depending on your loan, part of your monthly payment may eventually go into an escrow account so those expenses can be paid when they’re due.
Your lender may collect money at closing to establish that account.
That can make the final cash-to-close number look larger than buyers expected if nobody explained it beforehand.
Surprises are great for birthday parties.
They are less fun at closing.
Can a Seller Pay Some of Your Closing Costs?
Sometimes.
Depending on the loan program, the contract terms and current market conditions, a seller may agree to contribute toward allowable buyer closing costs and prepaids.
That can be helpful if a buyer has enough money for the down payment but would prefer to keep more cash in reserve.
But seller concessions are negotiated.
They are not guaranteed, and they don’t make sense in every transaction.
This is one more reason I don’t believe every offer should look exactly the same.
The offer should make sense for the house, the market and the buyer sitting in front of me.
Real estate is not one-size-fits-all, no matter how much the internet would like it to be.
What Do You Usually Pay Before Closing?
Some costs may come out of pocket while you’re under contract rather than at the closing table.
Those can include:
• Earnest money
• Home inspection
• Appraisal
• Certain lender-related expenses
Then the remaining funds required for the purchase are typically handled at closing.
So no, you do not usually walk into the title company with one giant suitcase full of money and dramatically slide it across the table. Besides, the funds need to be wired anyway.
The Better Question Isn’t “Can I Afford to Buy?”
At least not until you have real numbers.
The better questions are:
What would buying look like for me?
How much cash would I actually need?
What would my monthly payment look like?
What loan programs might fit my situation?
How much money would I still have left after closing?
That last question matters.
I would much rather see somebody buy a home comfortably than spend every last dollar getting the keys and then have the water heater decide two weeks later that it has lived a full and meaningful life.
You want enough left over that a broken dishwasher is annoying, not a financial emergency.
Don’t Disqualify Yourself Before You Even Start
You may talk to a lender and discover you’re not ready yet.
That’s okay.
A good lender should help you understand exactly what needs to happen next so you have a path forward instead of a vague instruction to “work on things.”
Or you may discover that some of the things you’ve been worrying about aren’t keeping you from buying at all.
Either way, facts are much more useful than assumptions.
If you’re thinking about buying, I’ve put together a Nashville Home Buyer First Steps Guide to help you understand what happens before you ever write an offer.
[Get the Nashville Home Buyer First Steps Guide]
And if you’re still wondering, “Could I actually buy a house?”
That’s a perfectly good place to start.