Education Center

How much money will I need to buy a home?

You'll need more than the down payment on hand when you buy a home. Get familiar with all the costs so you can budget accordingly and avoid surprises.

Earnest money

When you make an offer to buy a home, you'll have to put down earnest money for your offer to be considered. The amount can range from hundreds of dollars to more than a thousand.

Your earnest money will be held in escrow. Once you close on the house, it will be applied to your down payment. If you pull out of the offer for a reason agreed upon in your contract, such as repairs that cost more than a threshold amount, then you'll get your money back. However, if you pull your offer for a reason that isn't specified in the contract, you stand to lose this money.

Down payment

A common down payment is 20% of the value of the home. Many people save for their down payment for several years. When you make a down payment, you're paying cash for part of the price of the home. Then your mortgage covers the difference. There are many loan options available that require less than 20% down.

Here's a quick comparison of the differences between lender-paid and borrower-paid mortgage insurance to consider as you're consulting with your mortgage loan professional.

Cash reserves

You'll need to have savings or investments available after you get your mortgage. And you have to prove it before the loan is approved. In most cases, you'll need to show that you had these assets available for at least two months.

So how much will you need? The amount varies based on the level of your debt to income. Speak to your mortgage professional in advance of closing about what you need for your cash reserves.

Closing costs

After your loan is approved, your closing costs can easily add up to several thousand dollars. Make sure to have an estimate of them in advance. Some sellers will pay for your closing costs, and some lenders will include them in the mortgage loan.

Closing costs can include:

  • Legal fee
  • Appraisal fee
  • Survey fee
  • Title insurance
  • Origination fee
  • Underwriting fee
  • Discount points
  • And more

Mortgage payments

Clearly, this is one of the most important cash considerations during the mortgage application process. Your choices up front will affect what you spend every month for the life of your loan.

Once you've closed on your mortgage, soon enough you'll begin making your monthly mortgage payment. You'll know the amount you've settled on in advance, along with any additional amounts for taxes, homeowners insurance and private mortgage insurance (PMI).

Escrow payments

Escrow accounts are commonly used to pay real estate taxes and homeowners insurance for the year. They save you from having to pay all at once. You make monthly escrow payments on top of the principal and interest.

If you're planning on using escrow payments, factor them into your monthly payments for your new house.

PMI

For conventional loans, private mortgage insurance is paid by borrowers who do not pay 20% for their down payment. If you have PMI, it will be added to your monthly mortgage payment, or you can pay it all at once at closing. Once you have accumulated 20% equity in your home, you will no longer have to pay PMI for your mortgage. FHA and VA loans have different requirements regarding mortgage insurance, which does not allow for cancellation. Consult a Mortgage Loan Professional for more information.

Moving costs

Moving costs can add up quickly. Based on how much stuff you have, you might need to hire professional movers, or maybe you're considering going the DIY route, which is generally the lower cost option. Either way, you'll need to factor in moving supplies like boxes, tape, padding, labels and everything else. Whether you plan to use a moving company or do it yourself, make sure you get an accurate quote ahead of time so you'll know how much to budget for moving day.

Furniture and appliances

Buying furniture for your new home can be a significant expenditure that runs into the thousands of dollars. Major appliances will also incur high costs. Be sure to consider these important items if you'll need them in your new home.

Repairs, painting, landscaping—and HOA fees

Will your new home need any work done to the house? What about the landscaping? Will there be one-time expenses, or recurring ones? Try to avoid any surprises with a solid plan that will help you pay for these costs. And don’t forget to pay your HOA fees, if they are required.

Keep it up. You're getting smarter about home buying.

Related topics

Top 10 ways to save for a down payment

By saving for a down payment, you can lower your loan amount and monthly payment.

Do all mortgages require a high down payment?

Learn about your options for a low—or even zero—down payment mortgage.

What are the steps to buying a home?

See the big picture of buying a home, from prequalification to closing.

11 clever tips for home buyers

Keeping these suggestions in mind could help you avoid problems and find the right home.

For comparison purposes, a 30-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 4.199% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result in 360 equal payments of $969.30. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 15-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 3.378% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result 180 equal payments of $1,405.34. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 3-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.101% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 36 equal payments of $926.23 and 324 equal payments of $965.82. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 5-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.052% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 60 equal payments of $926.23 and 300 equal payments of $963.40. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 7-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.020% with 0.125 discount points and a $895 origination fee with a credit score of 720 would result in 84 equal payments of $926.23 and 276 equal payments of $960.90. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

For comparison purposes, a 10-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.110% with 0 discount points and a $895 origination fee with a credit score of 720 would result in 120 equal payments of $954.83 and 240 equal payments of $965.24. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 10/24/17. Rates and programs may change at any time.

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