Own Luxury Homes®
How Much Cash Do You Need to Buy a House?
$400K home, 5% down: $8K EMD (day 1–2), $350–$650 inspection (wk 2), $500–$800 appraisal (wk 3), $16K remaining down + $8–16K closing costs + $6–8K reserves at closing (day 45). Reserves must stay in bank — the most common first-time buyer surprise. Own Luxury Homes® 12-Point Agent Integrity Audit™ — specialists who walk through the full cash plan.
How Much Cash Do You Actually Need to Buy a House? The Full Number Lenders Don’t Give You
The number lenders quote is the down payment. The number you actually need in your bank account is substantially larger. First-time buyers who plan for only the down payment regularly arrive at closing surprised by $8,000–16,000 in closing costs they budgeted incorrectly, an inspection bill that hit before they expected, and a lender asking for 2–6 months of reserves they hadn’t set aside. This page gives you the real number, broken down by when each dollar is due, on a $400,000 home with a 5% down payment.
The Complete Cash Timeline: When Every Dollar Is Due
| When | What | Amount ($400K / 5% down) | Notes | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Day 1–2: Offer accepted | Earnest money deposit | $4,000–8,000 (1–2%) | Due within 24–48hrs; liquid; goes to escrow; applied to closing | ||||||
| Week 2: Inspection period | Home inspection fee | $350–$650 | Out of pocket; cannot be financed; separate from EMD | ||||||
| Week 3: Appraisal ordered | Appraisal fee | $500–$800 | Usually billed to buyer by lender; cannot be financed | ||||||
| Week 3–4: Optional | Specialty inspections (radon, sewer, etc.) | $150–$600 each | Optional but often worth it; out of pocket | ||||||
| Day 40–45: Closing | Remaining down payment | $20,000 minus EMD paid = ~$16,000 | Must be certified/wired funds; no personal checks | ||||||
| Day 40–45: Closing | Closing costs (lender + title + prepaid) | $8,000–16,000 (2–4%) | Itemized on Closing Disclosure; can sometimes be rolled in or seller-credited | ||||||
| After closing: stays in bank | Cash reserves (cannot be spent at closing) | $4,000–8,000 (2–6 months PITI) | Lender verifies these remain after closing; touching them can kill the loan | ||||||
| Year 1: Ongoing | Home maintenance fund (separate from reserves) | $3,000–5,000 recommended | Not required by lender; strongly recommended; 1% of home value/year rule of thumb | ||||||
| Based on $400,000 purchase price, 5% conventional down, national average closing costs. Numbers vary by location, loan type, and negotiation. | |||||||||
The Closing Costs Surprise: What’s Actually Inside That Number
Lenders tell you closing costs are "2–5%." That range is so wide as to be nearly useless for planning. Here is what actually makes up a typical $400K conventional purchase closing:
| Cost Category | Typical Amount | Who Gets It | Negotiable? | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Loan origination / lender fee | $1,000–2,500 | Your lender | Yes — shop lenders | ||||||
| Appraisal | $500–$800 | Appraiser | No | ||||||
| Title insurance (lender’s policy) | $700–1,200 | Title company | Shop title companies | ||||||
| Title insurance (owner’s policy) | $500–1,000 | Title company | Sometimes buyer, sometimes seller by custom | ||||||
| Title search and settlement fee | $500–$800 | Title/escrow company | Limited | ||||||
| Recording fees | $50–$300 | County/government | No — set by law | ||||||
| Transfer tax (where applicable) | 0.1–2%+ of price | State/county | No — set by law | ||||||
| Prepaid homeowners insurance (1yr) | $1,200–2,400 | Your insurer | Shop insurers | ||||||
| Property tax escrow (2–6 months) | $1,500–6,000 | Escrow account | No — based on tax rate | ||||||
| Prepaid interest (closing to first payment) | $300–1,200 | Lender | Close earlier in month to reduce | ||||||
| TOTAL TYPICAL RANGE | $8,000–16,000 | — | Get Loan Estimate from lender for specific breakdown | ||||||
| FHA adds upfront MIP (1.75% of loan = $6,650 on $380K loan). VA adds funding fee (1.25–3.3% of loan, first-time varies). USDA adds guarantee fee (1% upfront). | |||||||||
The Reserves Requirement: The Money That Must Stay
Reserves are funds the lender verifies you have after closing. They are not spent at closing — they must remain in your account. For a conforming conventional loan on a primary residence: most lenders require 2 months of PITI (principal, interest, taxes, insurance). On a $400K purchase at 6.5% with typical taxes and insurance, monthly PITI is approximately $3,200 — so 2 months = $6,400 that must stay in your account after closing. If you drain your account to maximize the down payment and have nothing left, the lender may refuse to fund even if you were previously approved.
How to Reduce the Total Cash Required
| Strategy | How Much It Can Save | Trade-off |
|---|---|---|
| Down payment assistance (state DPA) | $5,000–25,000+ on down payment or closing | May restrict lender choice; income limits apply |
| Seller-paid closing costs (concessions) | $5,000–12,000 in closing costs | May weaken offer in competitive market; has lender caps |
| Lender credit (take higher rate) | $2,000–5,000 in closing costs | Higher rate = more interest over life of loan |
| FHA instead of conventional (lower down) | Reduces down payment; but adds MIP | MIP lasts life of loan if under 10% down |
| Gift funds from family | Up to 100% of down payment in some programs | Must be documented as gift, not loan; gift letter required |
“The buyers who arrive at closing in the best shape are the ones who planned for the full number 6–12 months out — not just the down payment. I always tell first-time buyers: figure out your all-in cash number first. If you’re targeting a $400,000 home, plan to have $40,000–50,000 liquid before you start making offers. Then see what DPA programs can cover. That sequence works. The reverse — planning the down payment and hoping closing costs work out — leads to panicked phone calls the week before closing.”
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes®
How much money do I need to save before buying a house?
On a $400,000 home with 5% down: approximately $30,000–45,000 total liquid cash. Breakdown: $8,000 down (5% minus earnest money credit), $10,000–16,000 closing costs, $4,000–8,000 earnest money (applied to closing), $6,000–8,000 reserves (stays in bank). Down payment assistance can reduce the out-of-pocket amount significantly.
What is earnest money and when is it due?
Earnest money is a good-faith deposit paid within 24–48 hours of offer acceptance. Typically 1–2% of purchase price ($4,000–8,000 on a $400K home). It goes into escrow and is applied toward your down payment or closing costs at closing. You get it back if the deal falls through due to a contingency you had in the contract.
Do closing costs come out of my down payment?
No — they are separate. Your down payment and closing costs are both due at closing but are distinct amounts. On a $400K home with 5% down: $20,000 down payment + $8,000–16,000 closing costs = $28,000–36,000 needed at closing (minus any earnest money already paid).
What are cash reserves and how much do I need?
Reserves are savings the lender verifies you still have after closing. They are not spent — they must remain in your account. Most conforming loans require 2 months of PITI (principal, interest, taxes, insurance). On a $400K home, that is typically $5,000–7,000 that cannot be touched to cover closing costs.
Own Luxury Homes® — audited first-time buyer specialists who walk you through the full cash plan before you make your first offer. 12-Point Agent Integrity Audit™. Find your first-time buyer specialist ›
"The introduction Own Luxury Homes® makes is to a specialist with documented closing history in your specific market — not the county, not the metro, the submarket you're actually selling or buying in. That's the standard we verify before your name goes anywhere."
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes® (FL License BK3626873)