How Much Money Do You Need to Buy a House?

A blue and white house sits on a green lawn, surrounded by trees.

According to the U.S. Census Bureau, the median sales price of new homes in May 2020 was around $317,000. Even if you’re purchasing a home that falls well below that average, chances are it’s one of the most expensive things you’ll ever buy. With such a big expense, you might be wondering—how much do you need to save for a house?

The good news? You don’t have to save for the entire purchase price. But the amount you might need on hand to buy a home can be significant. Get some idea of how much money you might need to buy a house below.

How Much Should You Save for a House Down Payment?

It all depends on the price of the home you want to buy and what type of loan program you qualify for. Down payments are usually a percentage of the home cost.

You might have heard that you need 20% down to buy a home. That’s actually not entirely true. Although the Consumer Financial Protection Bureau makes a case for the benefits of 20% down, it also notes that this number doesn’t work for everyone.

So, where does the 20% figure come from? It’s part of the guidelines set by Fannie Mae and Freddie Mac, government sponsored, mortgage guarantee companies. You either have to pay 20% down or pay private mortgage insurance, because analysis indicates that loans without 20% down are riskier for the lenders.

Here’s a look at some common mortgage options and how much you might need to have for a down payment:

  • The CFPB notes that conventional loans with PMI can require 5 to 15% down on average. If the home price is $300,000, that’s $15,000 to $45,000.
  • Loans through the Federal Housing Administration require down payments of at least 3.5%. That’s $10,500 on a $300,000 home.
  • Some loan programs, such as those for rural borrowers through the USDA, or those who qualify for loans through the VA, don’t require a down payment at all.

Other Expenses to Save for

Down payments aren’t the only thing you need to save for when buying a home. Closing costs can be thousands of dollars, and you may need to foot the bill for inspections, home repairs or even fun things, like new furniture. To make the home-buying process less stressful, it’s a good idea to save more than you expect to need for closing costs.

How Long Will It Take to Save for a House?

Saving 20% of your income could catapult you into purchasing a home in the next one to three years, depending on your market. For example, if you’re earning $96,000 per year, that’s $19,200 saved after one year. It’s $38,400 after two years and $57,600 after three. Even if you need 20% down, these amounts are roughly enough to help you buy homes worth between $100,000 and $300,000 within three years.

How Much of Your Savings Should You Spend on a House?

It’s tempting to empty out your savings or cash in your 401(k) to buy your dream home. Even if the house is just your first step into home ownership and isn’t perfect, it’s tempting to do what it takes to get those keys.

But spending 100% of your savings leaves no safety net if something happens. What if something breaks in your new home or there’s a medical emergency? Having some savings on hand to cover these issues helps protect your home, because you’re more likely to be able to continue to pay the mortgage.

Planning to Purchase a Home

If you’re planning on buying a home in the future, it’s important to start saving today. Every little bit you can do to save for a home helps make it happen.

If you want to buy a home for around $300,000 and you can’t qualify for a loan program that requires no down payment, you’ll need at least $10,500 to $15,000. You’ll also need closing costs and other fees, which typically run between 2 and 5% of the purchase price. Assuming $10,000 in closing costs, you need $25,000 minimum to position yourself for home ownership.

A Short-Term Plan

If you’re looking to buy a home within the next year or two, you’d need to save $12,500 to $25,000 a year. Saving 20% of your income can help you save the bulk of that in one or two years if you make more than $50,000 annually. To do that, though, you’ll need to set an aggressive personal budget and be willing to cut out some extras, such as cable or eating out.

A Long-Term Plan

By starting your journey to home ownership as early as possible, you can stretch your plan to five years or more. If you save over the course of five years, that’s only $5,000 a year. That’s $416 a month or just under $100 a week. You really could save for a house this way simply by cutting out a few expensive coffees, pizza nights, dinners, etc.

Start Saving Today

How much should you save before you try to buy a home? It depends on so many factors that there’s not a one-size-fits-all answer. So, do your research early, make a plan and stick with it. And, as you get close to being ready to buy a home, don’t forget to shop around to find the best mortgage rates. Because those mortgage rates, along with your home price, determine how much you’ll pay for your home.

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The Pros and Cons of Building a Home in Today’s Market

In a year where new constructions are on the rise, and existing homes are swept off the market as quick as they arrive, some may be left wondering, “What’s the best option for me?” While newly built homes help offset the housing shortage and the demand that follows, sometimes waiting for a home to be built, location, and other cons could prevent that route from being a suitable choice or vice versa. These are the pros and cons of buying a newly constructed home.

Read: The Pros and Cons of Building as a First-time Homebuyer

new home construction pros and cons building a homenew home construction pros and cons building a home



Inspections can cost and the majority of buyers spend $300-$500, or more, depending on the size of the house, to get one. But, they’re worth the money. Having a proper inspection can help prevent you from having to deal with the repercussions of say a leaky roof, needing to repair an HVAC system, or any other problems you may find in an aging house. And, if these problems are large and expensive enough, they can drastically change your plan on buying the home – whether it be renegotiating or backing out altogether. But, don’t rely on your newly constructed home to not need an inspection. It’s always smart to bring an inspector into your newly constructed home too as they can identify areas of concerns which your contractor may have overlooked or worked too fast on, luckily, these repairs should be covered by a builders warranty.


Unfortunately, the inventory of existing houses for sale is dwindling with many would-be sellers still reluctant to put their places on the market and have visitors tour them at all hours of the day. And even though many realty agents have switched to virtual showings, most buyers eventually want to see a house close up and in person. Home builders, on the other hand, are rushing to meet demand. At last report, construction is surging above last year’s production figures. So, with newly constructed homes, inventory isn’t an issue. You find the development you’re interested in an explore their options to see if it’s a good fit for you. You can also independently purchase land to build your home on – the world can really feel like your oyster.

Read: How New Construction Homes are Helping Ease the Housing Shortage

Your Home’s Design

Inside the latest models, you’re likely to find larger rooms and open floor plans as opposed to the chopped up rooms found in most older existing houses. Open kitchens with islands and lots of light are the rage now, for example. Sometimes the master bedroom suite will be on the first floor, or maybe there will be two such enclaves instead of just one.

building a home design customizationbuilding a home design customization

Garages, too, are usually standard fare. In most new houses, you can park not just one but two cars under roof, whereas many older places don’t have even a one-car garage. And baths are far more luxurious, with a soaking tub and separate shower, a closeted commode and perhaps even his-and-her sinks.

Energy Efficiency

A new house is almost guaranteed to be more energy efficient, meaning it’s going to be less expensive to heat than an older place of comparable size. You’ll find brand new, never been used appliances that are probably Energy Star rated, and possibly even smart thermostats, door bells and other technological upgrades.


What’s more, most builders these days allow their buyers to customize their houses to one degree or another. Some will let you move walls. And the list of options and upgrades is often without limit. You can pick your flooring, cabinets, appliances, paint and any number of other features.

You’ll also get to pick your building site. Some lots may be more expensive than others, but you have the choice of a lot with a view, a wooded lot or possible even one near water. Be aware, though, that in some places, the cost of the house doesn’t include the price of the lot it will sit on.



None of this is to say existing houses don’t have advantages over newly built places. They do. For example, they’re generally less expensive. And you can haggle, not only on the price but closing costs, settlement date and what must stay with the house.

Read: How to Make an Offer That Will Win a Bidding War

negotiating on a home salenegotiating on a home sale

Actually, everything is negotiable when you buy a resale, right down to the dog the seller may not want to take with him. On the other hand, builders tend to balk at even discussing a lower price. They might throw in a free option or upgrade — maybe even two or three — but that’s about it. For the most part, their prices as firm.

Location, Location, Location

Existing houses are often in more desirable locations, too. Closer-in neighborhoods that, more often than not, are mature, much more so than new home projects. The landscape around the immediate house, its neighbors and up and down the street is likely to be full grown, with a spreading canopy of tree tops with swaths of colorful flowers and shrubs dotting the area.

Furthermore, the dynamics of the neighborhood are usually established. Many of the residents are long-termers who probably have been there for years. And you can tell how well they’ve flourished by how well – or perhaps more importantly, how poorly – they’ve kept up their properties.

You won’t know what you’re going to get in a brand new subdivision. Your neighbors could be great, and usually are. Most ne’er-do-wells don’t buy new homes. But you never know; your neighbor could turn out to be a deadbeat, a malcontent or just someone with whom you’d rather not associate. You can choose your house but you can’t choose your neighbor.

Charm and Character

Older homes also tend to have more character,and some people just prefer to live in a home that has that worn-in feel. There’s also the added benefit of buying a fixer-upper, homes that are existing but just need a little more TLC than a typical property.

older home charm and characterolder home charm and character


You are probably not going to get lush landscaping with a new home that you would with an existing one. But at least you can plant what you want once you move in to make it your own. And unlike years past, when builders tended to clear-cut wide swaths of the earth and then replant an immature tree or two and a few shrubs once the house was finished, most builders these days are going out of their way to save trees and other plantings.

Read: The 7 Best Ways to Landscape That Will Add Real Value to Your Home

Is Proximity Important?

New construction usually takes place further out into the suburbs. You might be able to find an in-fill property here and there. But for the most part, a new home usually means a longer commute to work. It also means you might have to wait for shopping, schools, libraries, firehouses and other key pieces of infrastructure to be built. Those things usually come after there are enough homes and people to support them.

Outside Noise

It’s also highly likely that you’re going to have to deal with on-going construction noise and traffic until the property is built out. That could range from hammering and bulldozing outside your bedroom window in the early hours of the morning as the house next door takes shape.

For more information on building or buying your next home, you can visit’s How To section for step-by-step guides on both of the processes.

Lew Sichelman

Syndicated newspaper columnist, Lew Sichelman has been covering the housing market and all it entails for more than 50 years. He is an award-winning journalist who worked at two major Washington, D.C. newspapers and is a past president of the National Association of Real Estate Editors.


How Much Will Cutting the Cord Save You?

How Much Will Cutting the Cord Save You?

Cord-cutting will save you money but for many people, that’s only part of the equation. Yes, you want to spend less on cable, but you want to do that without sacrificing too many shows you enjoy watching. So, before you rip the Band-Aid off, look at the facts, and find out exactly what cord-cutting would look like for you.

The cord-cutting decision is a big one. You need to weigh how much you’ll save vs. how much you’ll miss out on. What price do you put on being excluded from conversations about the latest shows and sports on cable? Are we talking about significant savings or significant pain here?

To start, let’s take a look at the numbers to figure out what you’re really paying per month for movies and TV shows.

What are you really paying for your viewing pleasure?

If your family is like 78% of U.S. households, you are spending an average monthly payment of $107 to subscribe to a pay-TV service (either traditional cable television, a satellite service, or a streaming option. That’s a number which has steadily inched up year after year.

When you have a family like mine, you may have also committed to several online streaming services. It’s hard to say no when friends on social media gush about must-see programs like The Marvelous Mrs. Maisel on Amazon Prime, The Great British Baking Show on Netflix, and The Mandalorian’s baby Yoda on Disney+.

Together an average family entertainment package — cable plus streaming services — can add up to over $140 per month, and that doesn’t include games.

How much are you spending?

And with so many cable options and a new “must-have” streaming service popping up seemingly every day, it’s easy to zoom past the average, if you’re not paying attention. Even if you stick to “the basics,” the amount you can spend can pile up fast.

Entertainment payments per month:

  • Cable bill: $107. U.S. average (according to a 2018 study by Leichtman Research Group)
  • Netflix for two H.D. streams: $12.99 (assuming you’re not borrowing a friend’s password!)
  • Amazon Prime: $12.99 (or a bulk bargain at $119 per year)
  • Hulu: $11.99

Pro tip: You can cut and paste this information into a spreadsheet to start your family budget for the new year.

Why not call and cancel cable right now?

Heck, you could save yourself $100 if you just cut the cord right now. But before you spend that money on last-minute holiday gifts, you should find out how much more your cable provider (which is generally also your internet provider) will charge you for broadband once you drop cable.  It’s generally at least $10 more a month without a bundle discount but, in some cases, the cost increase to get internet alone can be much higher, so, you have to weigh your actual savings.

Those fancy streaming subscriptions need a high-speed internet connection. Your cable/internet provider knows that and intends to make as much money off you as possible even if you cut the cord — this is especially true if you live in a market with only one provider (that also happens to be the cable company you just jilted).

I live in a rural area with broadband available only via Comcast. So, for us, it’s pay up or get ready to listen to the cows and the crickets. Our introductory rate was about $50 per month, not including setup and fees. Find out if you have a choice. Search for broadband and DSL providers in your zip code. The vast majority will offer service that’s fast enough to stream on multiple devices but be careful to read the fine print as what speeds the company promises to deliver. You will need service that’s 25 to 50 Mbps (megabits per second) in order to stream video well.

Before you cut the cord, do your research! If there’s competition in your area for internet service, try to negotiate a discount. It costs nothing to try, and you could save real money.

Pro tip: Some cable companies will offer you a “skinny” bundle with the major broadcast networks for just a few dollars more than getting internet alone. Ask before you fully cut the cord.

Prioritize your happiness

Cutting the cord almost certainly means losing access to some programming. That makes it a hard decision even when the savings will be significant. It’s important to look at your personal and family viewing habits before you make any decisions.

If you watch a lot of network television and live sports, then keeping cable might make sense for you. Or, if you prefer the content on streaming services, then go in that direction.

Consumers have more choices when it comes to television than ever before. That can be daunting – it’s easy to buy more than you can consume.

The good news is that most streaming services don’t penalize you for joining, watching what you want, and then leaving. Mix and match in order to find the right blend for you. That may mean leaving cable or opting for a smaller package.

Your options are plentiful and the choice is in your hands…though you’ll probably want to talk it through with all the other TV viewers in your home so you don’t accidentally inflict significant pain for relatively insignificant savings.

–By Nic DeSmet