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If you think you need a down payment of 20% of a property’s price in order to start home shopping, think again. Most homebuyers put down a significantly smaller amount. Opting for a lower down payment has the benefit of getting you into a home sooner than if you scrimped and saved for years. And you might reap the benefit from market appreciation as soon as you own a property.

Prospective homeowners may explore such options as mortgages with lower down payments (some are even available with 0% down to qualified borrowers), as well as down payment assistance programs.

Learn more here, including:

•   What is a down payment?

•   How much money should you put down to buy a house?

•   How can you lower down payment requirements when buying a property?

What Is a Down Payment?

First, the basics: What exactly is a down payment? A down payment is the amount of money that goes paid, in cash, toward the purchase price of the home. It must cover the gap between the purchase price of the home and the amount of the mortgage.

A down payment determines what kind of loan you can get, whether or not you’ll pay private mortgage insurance (PMI), what your monthly payment will be and even what your interest rate will be. A down payment doesn’t include closing costs.


💡 Quick Tip: Don’t overpay for your mortgage. Get a competitive rate by shopping around for a home loan.

How Much Should You Put Down on a House?

You might be wondering how much is a down payment and how long it will take you to save that down payment amount for. Here are some options to consider when it comes to down payment amounts:

•   20% Down payment: Many people believe mortgage lenders say this is the amount they must come up with, though that is not true. Yes, a bigger down payment lowers your mortgage. Your monthly mortgage payment is lower because of your higher down payment, and you’ll pay less interest over the life of the loan. Also, when your down payment is above 20%, your lender does not require you to purchase PMI, which can save you hundreds of dollars each month.

But paying 20% can take a lot of cash out of your pocket when you buy your home. For example, 20% on a home that costs $400,000 is $80,000 dollars. There are many people who want to buy a property, but simply can’t come up with that amount of cash or at least not until they’ve saved for a considerable amount of time.

•   8% Down payment: This is the average down payment on a house for first-time homebuyers, according to the National Association of Realtors®. (For repeat homebuyers, the figure jumps to 19%.) Making this much of a down payment means you won’t avoid PMI in most cases, but you’ll be able to buy a home with a smaller down payment and without having to save as much money. For a house that costs $400,000, that’s $32,000 you need to come up with.

•   3% to 5% Down payment: With a down payment between 3% and 5%, you’ll have a higher monthly payment because your loan amount is higher than if you were able to make a larger down payment. You’ll also pay more each month because of the PMI payment. Lower down payments mean you’ll also pay more interest over the life of the loan.

However, the main benefit of a low-down-payment loan is you’re able to buy a home sooner than if you wait to save a full 20%. For a $400,000 home, a 3% down payment is $12,000 and a 5% down payment is $20,000. Some loans have the option of eliminating PMI once the loan’s remaining principal balance drops to or below 80% of the original mortgage.

•   0% Down payment: Zero down payment options come with higher monthly payments, and there may be certain restrictions or qualifications (say, a certificate of eligibility for military members). They may be niche programs specific to a group of people or locality. Some zero-down programs do not require PMI, but may have an upfront cost to fund their own mortgage insurance, like USDA loans (more on those in a minute).

Considerations to Determine Your Down Payment

The large amount of cash typically needed makes first time homebuyers wonder how they can afford a down payment and if it’s possible to figure out how to lower a down payment on a house. A couple of points to consider:

•   It is possible to get a lower mortgage payment by paying down principal on your home with a larger down payment. A 20% down payment on a house eliminates the need to pay PMI every month, which saves you even more on your monthly payment. In this way, a larger down payment can benefit your cash flow and overall financial situation.

•   However, 20% of the price of a home in your market may be hard to save for. You can learn how to buy a house with no money down, but there are also 3%, 3.5%, or 5% down payment options available. A lower down payment may be able to help you buy a home sooner. You can begin reaping the benefits of home ownership that much soon and hopefully your home’s value will rise, contributing to your personal wealth.

Recommended: First-Time Home Buyer Programs

How to Lower Down Payment Requirements?

If you’re moving towards purchasing a home, you might be wondering if you can lower your down payment before closing. Generally speaking, you have a handful of options for lowering your minimum down payment amount requirement as you take out a home mortgage loan and become a homeowner.

Buy a Home in an Area Approved for USDA Loans

USDA loans have 0% down payment requirements, so if you can find a home in an area approved by USDA (typically but not always in a rural location), you may be able to get a 0% down payment loan. For the USDA loan, there are property and income requirements which are determined by the county you live in (or want to live in).

Use a VA Loan to Buy a Home

Qualifying veterans, active duty, National Guard, and Reserve members of the military can use a VA loan, a mortgage that comes with zero-down-payment financing.


💡 Quick Tip: Apply for a VA loan and borrow up to $1.5 million with a fixed- or adjustable-rate mortgage. The flexibility extends to the down payment, too — qualified VA homebuyers don’t even need one!^{†^}

Pay the Minimum Amount for a Down Payment

One solution is to look for a loan without potentially restrictive eligibility requirements, as with a USDA or VA loan, and instead shop around for a loan that has low down payment policies. Many lenders offer mortgages with as little as 3% down, which may work well for some homebuyers.

Find a Down Payment Assistance (DPA) Program

Down payment assistance programs vary from area to area as far as requirements and amounts go. If you really need down payment assistance, try to buy a home in an area that offers one of these options. DPAs are usually reserved for first-time homebuyers or low- to moderate-income buyers. They typically come in three forms:

•   Second mortgage. DPAs are often offered in the form of a second mortgage with low or zero interest rates. Some second mortgages may not need to be repaid after living in the home for a certain period of time, while others may only need to be repaid when the property is sold.

•   Grant. With a grant, the money you receive is not expected to be repaid. However, there may be requirements for living in the home as a primary residence for a certain number of years for the grant to be forgiven.

•   Tax credit. Tax credits can reduce the amount of federal tax you owe if the local housing finance agency (HFA) issues you a mortgage credit certificate. This certificate can free up money for down payment and closing costs.

Some examples of DPA programs across the U.S. include:

•   Kentucky: Borrowers can receive up to $10,000 repayable over a 10-year period at 3.75% interest via the Kentucky Housing Corporation.

•   California: CalHFA has down payment assistance loans of up to the lesser of 3.5% of the purchase price or appraised value to qualifying homebuyers.

•   New York City: The HomeFirst Down Payment Assistance Program offers up to $100,000 for first-time homebuyers who qualify.

•   Montana: Borrowers can qualify for up to $15,000 in assistance for a down payment from Montana Housing. Repayment is either due when the home is sold or in the form of a 15-year loan.

•   Chenoa Fund: The Chenoa Fund is a nationwide down payment assistance program for creditworthy individuals on FHA loans up to 5% of the down payment needed for low- to moderate-income households. Both repayable and forgivable options are available.

In some areas, DPA programs can be hard to find or difficult to qualify for. Your lender can be an excellent resource if you need help buying a home with a small down payment. Discuss options with a representative and see what is available.

Negotiate for Lender Credits

Lenders want your business, especially in a high-rate environment. You can ask for credits to be applied to your closing costs. When your closing costs are covered by the lender, you can put more of your money toward your down payment.

Ask for Seller Concessions

When you negotiate the purchase of property, you can ask for seller concessions. These typically determine home’s purchase price and which closing costs the seller is willing to pay. Like lender credits, you can put more of your own money towards the down payment when a seller can cover some of your closing costs.

Ask for a Gift from Family

Of course, not every prospective homebuyer is blessed with a relative who has money in the bank they might give you or lend to you with generous repayment terms. But if you are in a spot and unable to come up with the funds otherwise, you might see if anyone is able and willing to help you out.

The Takeaway

While they may come with higher monthly mortgage payments, lower down payment mortgages can help borrowers buy homes sooner. Lowering your down payment requires a good amount of research on the part of the borrower, exploring different loans, programs, and other options to help you afford a property.

Even then, you may not find a perfect solution. That’s why it can be important to choose a mortgage partner who’s willing to be with you every step of the way.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much money to put down on a house in 2024?

Deciding on how much money to put down depends on your individual financial situation, the area in which you live, and programs you’re able to qualify for. While putting down 20% could save you the money you would pay towards PMI, you may be able to get into a house sooner by paying a lower down payment amount (from 0% to 3.5%). First-time homebuyers are currently putting down 8% on average.

How can I get my house down payment lowered?

To get your down payment lowered, you can try: financing with a zero-down loan (such as a USDA or VA loan), asking for seller concessions, negotiating for lender credits, and looking for down payment assistance programs.

Will mortgage interest rates go down 2024?

It is looking likely that mortgage interest rates will stabilize or decline. At the start of 2024, both the Mortgage Bankers Association and Fannie Mae were calling for rates to decline to the 6% to 6.5% range in the year ahead.

Does having a cosigner lower your down payment?

A cosigner can help you qualify for a mortgage, but it won’t change the requirements of the mortgage. Different loan programs will each have their own down payment requirements.

Photo credit: iStock/aydinmutlu

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL0124009

As winter approaches, it may make sense — practically and financially — to prepare for the season ahead. Seasonal weather can transform minor issues into major ones, and cracks and holes around doors and windows can allow the money you spend on heating to literally fly away.  

Here, some smart moves for protecting your home, from the top of the chimney to the water heater in the basement. Plus, you’ll learn ways to finance improvements that will help get (and keep) your property in top condition.

Ways to Winterize a House

While the steps to winterize a home may differ in Alaska vs. Texas, it still helps to get ahead of any issues that may arise. No one wants to wind up with a leaky roof or an ice-cold home during a cold snap. 

It can be a smart move to start planning to winterize several months before the season arrives. The timing of the first frost varies from state to state, and of course, there are some regions of the U.S. that enjoy mild temperatures year-round. It may help to check the National Weather Service’s data that forecasts the first frost for each state to assist in your winterization preparation timeline. 

The following tips for winterizing a house may help you reduce future repair costs and heating bills. 

Protect Pipes or Pay the Piper

When deciding how to winterize a house, you may first consider how to address plumbing leaks and other issues.

Angi.com reports that the average burst pipe repair costs $500, but charges of up to $3,000 are not uncommon. Pipes in unheated areas of a home, including basements, attics, and garages, are among the most likely to sustain damage. But pipes running through exterior walls (including those in kitchens and bathrooms) in the heated parts of your home can also freeze.

Protecting the plumbing is clearly a situation where being proactive may save you a bundle. Pipe insulation can range from $0.50 to $1.50 or more per foot depending on whether you opt for tubular foam, spray foam, fiberglass, rubber or other kinds of insulation. Compare that to the $3,000 figure above to repair a significant leak, and the rewards of winterization can quickly become clear.

Adding insulation to attics (typically a $1,500 to $6,000 job), crawl spaces, and basements can help to keep those areas warmer, which can also help to keep pipes from freezing. (Yes, many houses have pipes in the attic.) What’s more, the E.P.A. says that homeowners can save up to 15% on heating and cooling costs by pumping up their home’s insulation. The higher an insulation’s R value, the better it may keep your home toasty. It can be a wise move to check the U.S. Department of Energy’s map and guide for more details on this topic.

Address HVAC Maintenance and Repair

Nobody wants the heating system to perform poorly during the winter — much less have it break down.

It’s a good idea to schedule a professional maintenance appointment (about $300 on average), including a filter change, before freezing temperatures arrive. Afterward, it’s best to change the filter at least every 90 days to keep your system operating optimally.

Additionally, maintenance and repairs to the heating, ventilation, and air conditioning (HVAC) system and cleaning out vents can improve airflow in your home.

One good move (if you haven’t already made it) can be to install a smart thermostat. If people in a home are away during reasonably regular times of the day or you want to lower the thermostat at night, it can make sense to install a programmable thermostat to save on energy costs. You could quickly shave $140 off your annual energy bill and plunk that into a high-yield savings account or your emergency fund.

It may be time to consider a new HVAC system for some people. The Department of Energy’s Energy Star program provides tips to homeowners to decide if replacing an HVAC system would be a good move.

Signs that it might be time to replace the unit include:

If you’re dreaming of a home of your own, pulling together a down payment is probably on your financial to-do list. That sum can seem hard to wrangle, but take heart: First-time homebuyers with good credit have an edge. They often can put just 3% down, and they have access to a host of down payment assistance programs. What’s more, there are other ways to gather cash for your property purchase.

In this guide, you’ll learn more about down payments and how to afford one for your first home.

What Is a Down Payment?

Simply put, a down payment is a sum of money, often a percentage of the purchase price, that a buyer pays upfront when purchasing a home or a car.

When talking about buying a home, many people believe that 20% in cash is required, but that’s not the case. Twenty percent is the figure needed to avoid paying PMI, or private mortgage insurance, but there are mortgages available with 3% or even 0% down payments in some situations.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

How to Afford a Down Payment on Your First Home

There are many ways to afford a down payment on your first home. Below, you’ll learn some ways to save up and find low down payment options as well.

But first, consider some general ways to raise cash:

•   Start a side hustle to bring in more income. That could mean driving a rideshare, selling your ceramics on Etsy, walking dogs, or any number of other pursuits. This is a popular strategy: In an April 2024 SoFi survey of 500 would-be homeowners, 41% of people said they had taken on more work or started a side hustle to increase their income.

•   Sell your stuff. If you have gently used items, such as clothing, housewares, electronics, and jewelry, you might get cash by selling them.

•   Automate your finances. Have some money direct-deposited into savings with every paycheck. That can build your down payment, and the money doesn’t go into your checking account, where you might be tempted to spend it.

•   Make a better budget. If you’re not saving at all or as much as you’d like, evaluate your earnings, spending, and saving to optimize that. The 50/30/20 budget rule is one popular budgeting method.

Smart Ways to Save Up for a Down Payment

Here’s the lowdown on how to afford a down payment on a house. Read on before you go shopping for a mortgage.

1. Get a Low Down Payment Conventional Mortgages

Conventional loans, the most common type of mortgage, are offered by private mortgage lenders, such as banks, credit unions, and mortgage companies. If you can find one with a low down payment requirement, that can take some of the pressure off of accumulating a large down payment. Getting prequalified or preapproved by a lender can help you determine your home-buying budget (in SoFi’s survey, more than one in four homebuyers based their budget off a lender’s assessment).

Some points to note:

•   Many lenders allow a down payment of 3% for a fixed-rate conventional conforming loan.

•   To qualify, borrowers usually will need to have a credit score of at least 620 and a debt-to-income ratio of 46% or less, though you might get approved with a DTI of 50%. Income limits may apply.

•   Putting 20% down, however, will allow a borrower to avoid private mortgage insurance (PMI) on a conventional loan.

2. Focus on Government-Backed Loans

If you are a low- to moderate-income borrower or have a lower credit score, you might want to pursue a government-backed loan, like an FHA, VA, or USDA mortgage. These also can have lower down payment requirements.

•   An FHA loan requires as little as 3.5% down on one- to four-unit owner-occupied properties as long as the borrower occupies the building for at least one year. To qualify for 3.5% down, your credit score must be 580 or higher. Someone with a credit score between 500 and 579 may qualify to put 10% down.

•   A VA loan, for veterans, active-duty military personnel, National Guard and Selected Reserve members, and some surviving spouses, requires no down payment. Borrowers can buy a property with up to four units, as long as the borrower occupies the property throughout the ownership. There is no stated minimum credit score, but generally speaking, lenders require a minimum credit score in the low- to mid-600s to qualify.

•   A USDA loan, for properties in eligible rural and suburban areas, also requires no down payment. Lenders typically want to see a credit score of at least 640, and household income can’t exceed 115% of the area’s median household income.

USDA and VA loans typically come with lower interest rates than conventional or FHA loans, but a USDA loan requires a guarantee fee, a VA loan requires a funding fee, and an FHA loan, upfront and annual mortgage insurance premiums (MIP). It pays to understand PMI vs. MIP to gain more insight onto the total costs of your loan.


💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

3. Down Payment Gifts

“Hey, Mom and Dad (or Great-Aunt Beth), I’d love it if you gave me a large cash infusion to help me buy a house.” It just rolls off the tongue, right? But in fact, one or more loved ones may be willing to pitch in toward your down payment or closing costs. In fact, almost one in four homebuyers (24%) in SoFi’s April 2024 survey had sought financial assistance from family or friends to buy a home.

Some details to know:

•   Under conventional loan guidelines, gift money for a principal or second home is allowed from someone related by blood, marriage, adoption, or legal guardianship, or from a domestic partner or fiance. There’s no limit to the gift, but conventional loans may require borrowers to come up with a portion of the down payment.

•   FHA guidelines allow gift money from relatives, an employer, a close friend, a charitable organization, or a government agency that provides homeownership assistance.

•   With USDA or VA loans, the only people who cannot provide gift funds are those who would benefit from the sale, such as the seller, lender, real estate agent, or developer. A mortgage gift letter signed by donor and recipient will be required, verifying that the down payment funds are not expected to be repaid. A lender may also want to track the gift money.

•   There are also gifts of equity, when a seller gives part of the home’s equity to the buyer to fund all or part of the down payment on principal or second homes. For FHA loans, only equity gifts from family members are acceptable. A signed gift letter will be required.

4. Crowdfunding a Down Payment

Crowdfunding to help buy a house? It’s possible with sites like GoFundMe, Feather the Nest, HomeFundIt, and even Honeyfund (which is set up as a crowdfunder for honeymoons). A couple of details to consider, because fees are often involved when you use these platforms:

•   GoFundMe charges 2.9% plus 30 cents per gift.

•   Feather the Nest isn’t associated with a mortgage lender, so donation seekers can decide where to go for a loan. It charges a fee of 5% for every contribution.

•   HomeFundIt charges no fees, but you must pre-qualify and then use CMG Financial for your home purchase. The site shows a money match toward closing costs for first-time buyers.

•   For Honeyfund, U.S. residents receiving U.S. dollars via PayPal are charged 3.5% plus 59 cents per transaction.

5. Retirement Account Withdrawals or Loans

It might be a good idea to explore all options for getting cash before tapping your 401(k) savings account.

As you probably know, taking money out of your 401k before age 59 ½, or before you turn 55 and have left or lost your job, is met with a 10% early withdrawal penalty and income tax on the amount. So withdrawing money early from this tax-deferred account has a painful cost and impairs long-term growth.

Here are other options if you want to tap retirement savings:

•   Borrowing from a 401k may be possible. Your employer’s plan might let you borrow money from your 401k and pay it back to your account over time, with interest, within five years, in most cases. You don’t have to pay taxes and penalties when you take a 401k loan, but if you leave your current job, you might have to repay the loan in full fairly quickly. If you can’t repay the loan for any reason, you’ll owe taxes and a 10% penalty if you’re under 59 ½.

•   A traditional IRA allows first-time homebuyers to take an early withdrawal up to $10,000 (the lifetime limit) to use as a down payment (or to help build a home) without having to pay the 10% early withdrawal penalty. They still will have to pay regular income tax on the withdrawal.

•   With a Roth IRA, if you take a distribution of its earnings before age 59 ½ and before the account is less than 5 years old, the withdrawal may be subject to taxes and penalties. You may be able to avoid penalties but not taxes if you use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.

If you’re under age 59 ½ and your Roth IRA has been open for five years or more, a withdrawal of earnings will not be subject to taxes if you use the withdrawal to pay for a first-time home purchase.

Recommended: First-Time Homebuyers Guide

First-Time Homebuyer Assistance Programs

Here’s another way to help make your home-buying dreams come true: State, county, and city governments and nonprofit organizations offer down payment assistance programs to help get first-time homebuyers into homes. (By the way, the definition of who qualifies as a first-time homebuyer is more expansive than it may seem.)

Down payment assistance may come in the form of grants or second mortgage loans with various repayment or loan forgiveness provisions.

HUD steers buyers to state and local programs, and the National Council of State Housing Agencies has a state-by-state list of housing finance agencies; each offers a wealth of information designed to boost housing affordability and accessibility.

First-Time Homebuyer Tips

As you save for your down payment, follow this advice to get ready to become a property owner:

•   Figure out how much house you can afford with a home affordability calculator. You want to budget appropriately. SoFi’s survey showed that 37% of prospective homebuyers used a home affordability calculator to help set their budget.

•   Don’t forget to account for closing costs, which are typically 3% to 6% of your loan amount.

Check your credit score and credit report. Building your credit and eliminating any errors on your report can help you qualify for favorable rates.

Recommended: Most Affordable Places to Live in the US

The Takeaway

How to afford a down payment on your first house? Saving is, of course, part of the equation. But you may not need to accrue that 20% of the purchase price that so many people aim for. There can be mortgages available with as little as 3% or even 0% down. Also, first-time homebuyers may benefit from assistance programs, down payment gifts, and other forms of funding.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much should I save for a down payment on my first house?

While many people aim for a 20% down payment to avoid paying PMI, there are mortgages available to qualified buyers with as little as 3% or even 0% down.

Can I borrow money for a down payment on a house?

You might be able to find a personal loan to use for a down payment, or you could see if a relative or significant other has funds to lend you. Check with your lender to see if this source of cash is acceptable, though.

What credit score do I need to buy a house with no money down?

You’ll typically need a credit score of at least 640 for the 0% USDA loan program. VA loans with no money down (and low down payment FHA and conforming loans) usually require a minimum credit score of 580 to 620.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q324-107

Buying a house is a major step, and planning to purchase a home can be a lot of fun. You get to figure out where you’d hang your favorite artwork, plant a vegetable garden, put the PlayStation — and maybe contemplate taking on some DIY projects yourself.

But there’s another, more nuts-and-bolts aspect to your pursuit of the American Dream: how to budget for a house. Most people in the U.S. are homeowners, with the latest Census data revealing that 65.6% had attained this status in the second quarter of 2024. So that’s a good indicator that buying your own home is within reach.

Doing so will likely require you to be smart about your finances, both as you save and then take on the responsibility of owning a home. To help you be successful in this pursuit, read on for the intel you need, such as:

•   How do I know how much house I can afford?

•   What are the costs/fees to consider?

•   What will my ongoing costs be?

•   How can I budget for a house?

Up-front Expenses

First, consider how much you would have to fork over if you find that perfect center-hall Colonial or loft-style condo. Once an offer on a new home is accepted, there are certain costs the buyer needs to pay right off the bat and, in most cases, out of their own pocket. These are called up-front expenses. Here are a few to prepare for as you consider how to budget for a house:

Down Payment

You may have heard of the traditional 20% down payment guideline, which helps you avoid paying private mortgage insurance (PMI) on applicable loan programs. Additionally, a higher down payment can sometimes result in better mortgage loan terms (such as a lower interest rate) which may translate into lower monthly mortgage payments.

Yep, it’s a lot of money to try to save, but if you can swing it, in the long run, applying a 20% down payment will likely save you from paying thousands of dollars in additional mortgage interest over the life of the loan. Can’t pull together that big a chunk of change? Look into your options for a mortgage lender with lower or no down payment. Some options:

•   The minimum down payment for a first-time homebuyer on a conventional loan can be as low as 3%. You may also need a certain credit score of, say, 620, to qualify for this kind of mortgage.

•   An FHA government loan that is open to everyone typically requires a down payment of at least 3.5%.

•   Veteran VA loans or government USDA loans may allow eligible borrowers to finance up to 100% of their home’s cost. In other words, no down payment is required.

It’s worth noting that, regardless of the size of your down payment, buying may still significantly reduce your overall monthly expenses, compared to your current rent and real-estate market conditions.

3% to 5% Closing Costs

You can likely expect to pay an estimated 3% to 5% of your home price for closing costs, and should save accordingly. For example, if you buy a home that costs $300,000, you may be required to pay between $9,000 and $15,000 in closing costs.

Worth noting: Some costs are fixed and not tied to the price. In these cases, the percentage can be higher for the lower range and lower for the higher purchase price range.

What exactly comprises closing costs? This can be bank charges like origination fees and any points you may have purchased to buy down your interest rate. There are also costs like the appraisal fee, a title search, and others.

Keep in mind that there are alternatives to paying the closing costs out-of-pocket, such as requesting a seller credit, requesting a lender credit, or tapping an applicable down payment assistance program. These can help you minimize this expense.

Moving Costs

Don’t forget when budgeting for buying a house that you will need funds to actually move in. Unless you’re lucky enough to have a generous pal with a van, you are probably going to have to hire a moving company when it’s time to get settled in your new home. The average cost of moving the contents of a three-bedroom home 1,000 miles is $4,800 according to research by U.S. News & World Report.

These costs can vary widely, of course. If you are moving with just a bedroom’s worth of furniture versus a whole house, your price tag will be lower. It’s wise to comparison-shop for moving companies and factor this expense into your own budgeting for a home move.

If you are moving for work reasons, check with your company to see if it offers a relocation package to help cover some or all of the moving costs.

New Furniture and Appliances

Your new house may not have the same dimensions and style of your old house. That could mean that you need to buy new furniture and appliances. When budgeting for buying a house, you might want to talk to friends or relatives who have moved recently and inquire about unexpected expenses as well. For example, it’s not uncommon when you move to have to purchase such items as new locks, shower rods, and window treatments. These can add up quickly.

You might want to start a savings account for these types of purchases — some of them may be unexpected and costlier than you imagined.

Recommended: First-Time Homebuyer Guide

Ongoing Expenses

Now that you’ve figured out the details related to the actual purchase, consider the expenses that will accrue once you are a homeowner. This is a very important step when budgeting for buying a house. These recurring charges are a vital part of the calculations of how much home you can afford.

Monthly Charges

First, consider how much you’ll be spending every month on your monthly mortgage payment and related costs. PITIA (principal, interest, property taxes, homeowners insurance, and other assessments) is an acronym describing all the components of a mortgage payment. Here’s how it breaks down:

•   P: The principal is the “meat” of the monthly payment amount — paying down the principal will reduce the loan balance.

•   I: Interest is what you are charged for borrowing the money.

•   T: Taxes refer to your property taxes.

•   I: This “I” refers to insurance. This includes both your homeowners and mortgage insurance, if applicable.

•   A: The other assessments refer to things that may be applicable to the home you purchase such as homeowners association dues, flood or earthquake insurance, and more.

HOA Dues

HOA stands for homeowners association. These dues usually apply to a condo, co-op, or property owned in a planned community.

The charge is usually monthly (but it could also be charged quarterly or annually), and it typically goes to maintaining the community (landscaping, garbage collection, repairs, and upgrades).

Before purchasing a property with HOA dues, it can be important to ask the Homeowners Association for a complete HOA questionnaire. With this in hand, you can view how healthy the association is, whether there is any outstanding litigation due to structural or other issues, etc. These could mean increased costs down the road.

Maintenance and Lawn Care

Your budgeting probably won’t stop once you’ve moved and settled into your new home. Expenses will likely continue to knock on your door — landscaping, roof repair, and water heater replacement are just a few items that might require ongoing financial consideration.

You may want to budget for 1% to 4% of the cost of your home in maintenance each year to pay for these expenses. However, deferred maintenance costs may require more funding, depending on the age, quality of construction, where you live, and more.

Pest Control, Security, Utilities

The cost of electricity, gas, water, and internet services differ from market to market. This is also true with pest control, and services that help ensure your home is secure and safe. You could find yourself paying more (or even less) for these services in your new home.

How Much House Can You Afford Quiz

Planning Ahead

So now that you understand the costs associated with homeownership, whether they are one-time or ongoing, you can get to work on how to budget for a house.

Ideally, you want to cover the homebuying costs and then be able to afford your monthly carrying costs without racking up debt. The standard advice is that your monthly housing expenses should account for up to 28% of your monthly pre-tax income. Given how expensive some housing markets can be, it’s not uncommon to find people spending more than that right now.

Here, some advice on figuring out what you can afford.

Target Mortgage Costs

Do your research on the different types of mortgage loan programs. Determine what your price range is given the current interest rates. Find the programs that may best suit you, so you’ll feel confident you can bid and afford a home once you have your down payment saved. Don’t forget to factor in those other PITIA expenses mentioned above as you think about your own monthly income and cash outflow when you’re a homeowner.

Build a Budget

Once you have these costs calculated, you can then start budgeting for buying a house. You’ll want to accumulate your down payment, while taking care of current bills and other financial obligations, of course.

•   Create a line item budget. You’ll want to note how much money you have coming in and how much goes out toward your needs (housing, food, medical expenses, debt repayment). Then you’ll see what’s left for your wants (think travel, dining out, clothes, entertainment) and start saving it, whether for your future home or retirement.

   Don’t skimp, though, on establishing an emergency fund. In a pinch, these funds can keep you from using your credit card and running up even more debt.

•   Assess where you can save more. To ramp up your savings for your house, look for ways to economize. Could you drop a subscription or two to streaming channels, or perhaps eat out less often?

   Also see what you can do to avoid high-interest credit card debt, which can take a bite out of anyone’s budget. You might want to take advantage of a zero-interest balance transfer credit card offer, or investigate whether a lower-interest personal loan could help you pay off your debt and save money.

•   Use automatic transfers. Help yourself hit your savings goals by automating payday transfers from checking to savings. That way, you won’t see the cash in your account and be tempted to spend more.

•   Bring in more moolah. If the numbers aren’t adding up to bring your homebuying plans within reach fast enough, consider using windfalls (a tax refund, a bonus at work, a birthday gift of cash from a relative) to plump up your savings. Also think about ways to bring in more income, whether by asking for a raise or pursuing a side hustle.

The Takeaway

Budgeting for buying a house requires thinking about both short-term costs, such as a down payment, closing costs, and moving expenses, as well as long-term costs such as homeowner’s insurance and maintenance expenses. It’s wise to look at both before you pursue a mortgage preapproval or make an offer on a home.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much money should you save before buying a house?

If possible, you should save enough money for a down payment on a house in the price range you’re thinking about. But you don’t need to make a 20% down payment — many homebuyers put down less, and some government programs will allow you to buy with no down payment at all. You’ll also want to have closing costs on hand (3% to 6% of the home’s price). And it’s wise to always have an emergency fund in case of an unexpected setback.

How much do I need to earn to afford a house?

How much you need to earn to afford a house depends on the housing market you’re looking in and the area’s overall cost of living. The national average salary is $63,795 and at that salary you may be able to afford a home priced at $180,000. Use a home affordability calculator to explore the numbers for your specific situation.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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Most people in the market for a new dwelling will buy an existing home that more or less fits their needs. But new homes don’t come with the problems that old homes might, from lead paint to a kitchen crying out for remodeling. And building a house may seem attractive because you can construct it to fit your specifications, from the number of bathrooms to building an outdoor kitchen.

If you’re ready to build your own house, here are the steps to take.

10 Steps to Building Your Own Home

Condo. Townhouse. Single-family home. Modular or manufactured home. Cabin or even houseboat. A house hunter has all of those types of homes to choose from. If you’re building a home, you’ll have a lot of choices to make as well, starting with where your home will be located. Here are the steps to building your own home:

1. Find a Location

The first thing you’ll need to do is find a site that’s zoned for a residential property. Look into local building regulations to see how much of the site you are allowed to build on and how far from property lines the building must be set back. Check ordinances that might limit size or height. Is there a homeowners association (HOA)? Scour the rules.

It’s generally suggested that you not spend more than 20% of your total budget on the building site. When you purchase the land, you will acquire a property deed, which will also act as the house deed.

2. Obtain Permits

Before a shovelful of earth is turned, the local building department must OK the plans and provide permits for the whole shebang: grading, zoning, construction, electrical work, plumbing, and more. When the permits are in hand, construction can start.

On a related note, at various points during construction, the home will need to be inspected for code compliance. If you are using a loan for new construction, your lender may also send an inspector to keep track of construction status before releasing payments from a construction loan.

3. Prep the Site and Your Finances

Site Prep

Before you start building, you’ll need to prepare the building site. You’ll want to be sure that soil conditions are stable. You may want to engage a civil engineer to give the site a look. A site surveyor can stake the property boundaries. Then you’ll need to clear brush and debris at least to 25 feet around the planned perimeter of the house.

Size and Cost

The cost of building a house averaged $313,884 in 2022, according to HomeAdvisor, the directory of service pros, but a typical range is from around $137,000 to $582,000. Obviously location, materials, and level of detail affect the bottom line.

But size is the biggie. The larger the build, the more labor and material costs you should expect. The average new home in the country has about 2,200 square feet at $150 per square foot, HomeAdvisor notes.

After the peak of the pandemic, there were months-long delays to receive materials, from appliances to garage doors, and construction costs increased. Oil prices significantly increased transportation expenses. Rising inflation left its mark, but prices leveled off in 2023. All of which is to say, cost numbers are a moving target.

Finance Options

When you build a home, you may need a loan that covers the purchase of land, buying materials, and hiring labor. In this case, you may want to look into a construction loan. Unlike mortgage loans, construction loans are not secured by an existing home, so approval might be tricky and take a bit longer.

The money is paid to your builder in installments. You’ll often only pay interest on the portion of the loan that has been withdrawn. After the typical 12 to 18 months of a construction-only loan, the usual route is to take out a mortgage and pay off the construction loan.

Other financing options are a home equity loan, if you already own a home.

A personal loan of up to $100,000 can pay for part of the construction (or maybe all, for a modest build).

If you’re buying the land, Federal Housing Administration (FHA) one-time close loans cover the lot purchase, construction, and permanent mortgage. But the loans can be hard to find and are tougher to qualify for than traditional FHA loans.

Check out these additional resources for homeowners.

Choosing Materials

Only an experienced and highly organized person may want to act as their own general contractor for a new house build. Most people will put the job in a contractor’s hands, and add 20% to 30% for the cost of materials and labor.

General contractors already have priced and sourced many of the materials when making a bid. They usually have relationships with wholesale distributors, lumberyards, and retailers.

That said, you may have some skills that you could apply to cut costs. For example, you could look into how much it costs to paint a house and determine if painting the home’s interior could help you save.

Building a Work Team

If you choose to fly solo, you’ll be on the hook for finding subcontractors yourself.

A general contractor will hire all of the team members needed to complete the project and charge 20% to 30% of the overall cost of the home. However, they also typically have regular relationships with subcontractors, who may charge them less than they would a person who hires them on a one-off basis.

As a result, you may not end up saving much or any money by finding subcontractors yourself.

4. Pour the Foundation

Once the building site is cleared, construction can begin, starting with the foundation. Some houses are built on level slabs of concrete that are poured on the ground, leaving space in which to run utilities, like plumbing and electrical.

A home with a full basement requires that a hole is dug and that footings and foundation walls are formed and poured. The concrete will need time to cure, and no construction will take place until it has set properly.

5. Set Up Plumbing

Once the concrete has set, crews install drains, water taps, the sewer system, and any plumbing going into the first-floor slab or basement floor, and then backfill dirt into the gap around the foundation wall.

6. Assemble the Frame, Walls, and Roof

With the foundation complete, framing carpenters will build out the shell of the house, including floors, walls, and the roof. Windows and exterior doors are installed, and the house is wrapped in a plastic sheathing that protects the interior from outside moisture while allowing water vapor from inside the home to escape.

7. Install Insulation, Complete Electric and Plumbing Installs

Now plumbers can install water supply lines and pipes to carry water through the floors and walls. Bathtubs and showers may be added at this time.

Electricians will wire the house for outlets, light fixtures, and major appliances. Ductwork and HVAC systems can be installed.

8. Hang Drywall and Install Interior Fixtures and Trim

With plumbing and electrical complete, the house can be insulated and drywall can be hung. A primary coat of paint goes on, and the house will start to look relatively finished.

Light fixtures and outlets can be installed, as can bathroom and kitchen fixtures, like sinks and toilets. Interior doors, baseboards, door casings, windowsills, cabinets, built-ins, and decorative trim go in. The final coat of paint is applied.

9. Install Exterior Fixtures

Crews begin exterior finishes like brick, stone, stucco or siding. Some builders pour the driveway when the foundation is completed, but many opt to do so toward home completion, along with walkways and patios.

10. Install the Flooring

Wood, ceramic tile, or vinyl floors and/or carpet can be installed at this point.

Recommended: First-Time Homebuyer Guide

Is It Cheaper to Buy or Build a New House?

There are so many variables that it’s hard to say.

The median sales price for new construction in April 2024 was $433,500, according to FRED, or Federal Reserve Economic Data. Can you beat that price with a DIY build? Maybe, if you act as the general contractor and choose cheaper materials.

Keep in mind that HomeAdvisor’s average of $313,884 to build a house does not include the land.

Ultimately, the price of your dream home hinges on location, the cost of labor and materials, and your taste.

3 Home Loan Tips

1.   Since lenders will do what’s called a hard pull on an applicant’s credit, and too many hard pulls in a short period can affect your application, it’s a good idea to know what interest rate a lender will offer you before applying for a personal loan. Viewing your rate with SoFi involves only a soft pull on your credit — and takes one minute.

2.   Before agreeing to take out a personal loan from a lender, you should know if there are origination, prepayment, or other kinds of fees.

3.   Traditionally, mortgage lenders like to see a 20% down payment. But some lenders allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.

The Takeaway

Building your own home will allow you maximum flexibility in terms of your choices of everything from floorplan to finishes. But it is a complex process and you’ll want to take it step by step, with careful consideration of your budget and how you plan to finance what you build.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How long can you expect to live in a self-built home?

If a home is well built and maintained properly, you can expect it to last a lifetime.

How long will it take to build a home?

The average time it takes to build a home from start to finish is 9.4 months for a contractor build and 12 for an owner build, according to data collected by the U.S. Census Bureau.

Is it dangerous to build a home yourself?

If the question means completely DIY — clearing a lot, pouring a foundation, framing, installing electrical, and so on — the answer is “it sure could be.”

Are there safe financing options for self-build projects?

DIY builders and remodelers may use a construction loan, personal loan, home equity loan, or FHA one-time close loan. If you do use a construction-only loan, shop for a mortgage that makes sense once you stand there admiring the finished product.

Photo credit: iStock/Giselleflissak

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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