Short answer: The cash needed to buy a home is more than the down payment. Plan for the down payment, lender and settlement costs, prepaid taxes and insurance, inspection and moving expenses, and a reserve for repairs. The final amount varies by loan, location, contract, and negotiated credits.
For a $300,000 home, a 5% down payment is $15,000. If you use a preliminary planning range of 2%–5% of the price for closing costs and prepaids ($6,000–$15,000), the rough cash target before credits and other expenses would be $21,000–$30,000. This is a planning illustration, not a quote.
What goes into the cash needed to close?
- Down payment: Your portion of the purchase price that is not financed.
- Closing costs: Lender charges, appraisal, title and settlement services, recording fees, and applicable taxes.
- Prepaids and initial escrow: Items such as homeowners insurance, prepaid interest, property taxes, and the initial escrow deposit.
- Earnest money: A deposit often paid after contract acceptance. If handled according to the contract, it is generally credited toward your funds due at closing rather than being an extra down payment.
- Inspection and moving: These may be paid before closing and may not appear in the lender's cash-to-close figure.
- Reserves: Money kept after closing for maintenance, emergencies, and unexpected bills.
Example: cash needed for a $300,000 home
The table uses a broad 2%–5% planning allowance for closing costs and prepaids. Your lender's Loan Estimate and local service-provider quotes are more reliable than a percentage rule.
| Down payment | Down payment amount | Illustrative closing costs (2%–5%) | Estimated subtotal |
|---|---|---|---|
| 3% | $9,000 | $6,000–$15,000 | $15,000–$24,000 |
| 5% | $15,000 | $6,000–$15,000 | $21,000–$30,000 |
| 10% | $30,000 | $6,000–$15,000 | $36,000–$45,000 |
| 20% | $60,000 | $6,000–$15,000 | $66,000–$75,000 |
These subtotals do not include inspections, moving, repairs, or post-closing reserves. Seller credits, lender credits, eligible assistance programs, and deposits already paid can reduce the amount you bring to closing. A low-down-payment loan may also have mortgage insurance or other program costs.
Understand “cash to close” versus “closing costs”
Closing costs are the transaction expenses, generally separate from the down payment. “Cash to Close” is the final amount the Closing Disclosure says you must pay at closing after accounting for the down payment, closing costs, deposits already paid, credits, and adjustments. The CFPB recommends comparing the Closing Disclosure with your Loan Estimate and reviewing it at least three business days before closing.
How to avoid a last-minute cash shortfall
- Request a Loan Estimate from multiple lenders and compare the same loan scenario.
- Ask which third-party services you can shop for and obtain written quotes.
- Confirm the earnest-money amount, due date, and how it will be credited in the contract.
- Ask your lender to explain prepaid taxes, insurance, and initial escrow deposits.
- Check whether state or local down-payment assistance is available and whether it is a grant, forgivable loan, or repayable second lien.
- Keep an emergency reserve separate from the money you plan to wire at closing.
Continue with our closing-cost guide, down-payment assistance guide, and earnest-money deposit guide.
Frequently asked questions
How much money should I save before buying a house?
Save enough for your down payment, lender and settlement costs, prepaids, inspection and moving expenses, plus an emergency reserve. The right amount depends on the price, loan program, location, and credits.
Are closing costs included in the down payment?
No. Closing costs are separate transaction expenses. The final Cash to Close calculation combines the down payment, closing costs, deposits already paid, credits, and adjustments.
Does earnest money count toward my down payment?
It is commonly credited toward the buyer's funds due at closing when paid and handled under the purchase contract. Confirm the treatment with your agent and settlement professional.
Can a seller pay my closing costs?
A seller may agree to contribute within the limits of the loan program and transaction rules. The amount and eligible expenses depend on the financing and contract.
Sources and further reading
- CFPB: Review your Closing Disclosure
- CFPB: Mortgage closing documents
- CFPB: Know Before You Owe—Mortgages
Financial education only—not a mortgage offer, underwriting decision, tax opinion, or legal advice. Rates, eligibility, fees, and program rules change and vary by lender and location. Verify all figures with a licensed mortgage professional and review your official Loan Estimate and Closing Disclosure. Affiliate disclosure.