Cash to close = down payment + closing costs + prepaids and escrow − money you already paid and credits you receive.
How much down payment do you need?
Your down payment is the part of the price you pay yourself. The loan covers the rest. A bigger down payment means a smaller loan. The minimum depends on the type of loan and on you. These are typical published minimums, not a promise you will qualify:
| Loan type | Typical minimum down | On a $350,000 home |
|---|---|---|
| Conventional | As low as 3% for eligible first-time buyers; often 5% or more for others | $10,500 (3%) or $17,500 (5%) |
| FHA (Federal Housing Administration) | 3.5% with a 580+ credit score (10% at 500–579) | $12,250 |
| VA (Department of Veterans Affairs) | $0 for eligible borrowers with full entitlement | $0 |
| USDA (Department of Agriculture) | $0 in eligible rural areas, within income limits | $0 |
| Investor rental loans (like DSCR) | Commonly 15%–25% or more; as little as 15% with select programs (700+ score, loans up to $1 million) | $52,500 (15%) or more |
Rules change with credit, property type and lender. Lesson 5 explains each type of loan in plain words.
The mortgage insurance trade-off
Putting less than 20% down on a conventional loan usually means you pay private mortgage insurance (PMI). PMI protects the lender, not you. It adds to your monthly payment, but you can usually ask to remove it once you build enough equity. FHA loans have their own mortgage insurance: an upfront premium of 1.75% of the loan plus a yearly premium paid monthly.
So the choice is simple to say and harder to make. A small down payment gets you into a home sooner but costs more each month. A big down payment lowers the payment but can drain your savings. Keep enough cash for emergencies and for any reserves your loan requires.
What is in closing costs and prepaids?
Closing costs are the fees to make the loan and transfer the home. They commonly add up to a few percent of the price, and they vary a lot by state, loan type and lender. They often include:
- Lender fees, such as origination or underwriting fees (and points, if you choose to pay them).
- Third-party fees: appraisal, credit report, title insurance and the settlement or escrow company.
- Government fees: recording fees and, in some states, transfer taxes.
Prepaids and escrow are not fees. They are your own bills paid early: the first year of homeowners insurance, a few months of property taxes and insurance placed in an escrow account, and interest from closing day to the end of the month.
Your Loan Estimate shows these costs within 3 business days of applying. Your Closing Disclosure shows the final numbers at least 3 business days before closing. Lesson 7 shows you how to read it.
Money that lowers your cash to close
- Earnest money: a good-faith deposit you pay when the seller accepts your offer. It is held in escrow and credited to you at closing.
- Seller credits: the seller agrees to pay part of your closing costs. Each loan program limits how much the seller can pay.
- Lender credits: the lender pays some costs in exchange for a higher interest rate. Ask what the trade costs you over time.
- Gift funds: money from family, usually with a signed gift letter. Rules vary, and investment loans commonly do not allow gifts.
Reserves are different. They are savings you must still have after closing, often counted in months of house payments. Some loans need none. Others ask for several months.
What makes up cash to close ($350,000 example)
What you owe at closing: $31,000 total
How it gets paid
- Down payment
- Closing costs
- Prepaids & escrow / seller credit
- Earnest money (already paid)
- Cash you bring
Worked example: a $350,000 home with 5% down
| Down payment (5% × $350,000) | $17,500 |
| Closing costs (illustrative 3% × $350,000) | + $10,500 |
| Prepaids and escrow (illustrative) | + $3,000 |
| Total due at closing | $31,000 |
|---|---|
| Earnest money already paid | − $5,000 |
| Seller credit | − $4,000 |
| Cash to close | $22,000 |
The math: $17,500 + $10,500 + $3,000 − $5,000 − $4,000 = $22,000. The loan would be $350,000 − $17,500 = $332,500. Counting the earnest money, this buyer puts $27,000 of their own money into the purchase. These costs are examples only; real costs vary by state, loan and lender. Try the numbers yourself with our mortgage calculators.
What this means for you
Start saving for more than the down payment. Plan for closing costs, prepaids and a cushion for after you move in. Then check if a lower-down-payment program, a seller credit or a family gift could close the gap. Your monthly budget matters too: Lesson 3 on DTI shows how much payment lenders may allow.
Mistakes to avoid
- Saving only for the down payment and forgetting closing costs and prepaids.
- Moving or depositing large sums without paper records. Lenders ask where money came from.
- Emptying your savings to put more down, leaving nothing for repairs or reserves.
- Assuming a seller credit can be any size. Programs cap it.
- Wiring money from an emailed instruction without calling a known number to confirm it.
Words to know
- Down payment
- Closing costs
- Prepaids
- Escrow
- Earnest money
- Seller credit
- Reserves
- PMI
See the full mortgage glossary →
Common questions
Can I buy a house with no money down?
Yes, if you qualify for a VA loan (eligible veterans and service members with full entitlement) or a USDA loan (eligible rural areas and income limits). You usually still need some cash for earnest money, the appraisal and closing costs, unless seller or other credits cover them.
Are closing costs part of the down payment?
No. The down payment goes toward the price of the home. Closing costs pay for the loan and the sale, such as the appraisal, title work and government recording fees. You need cash for both, plus prepaids and escrow.
Can a family member give me money for the down payment?
Often, yes, for a home you will live in. Many programs allow documented gifts from family with a signed gift letter. Rules vary by loan type, and investment property loans commonly do not allow gifts, so ask before you move any money.
When will I know my exact cash to close?
Your Loan Estimate, sent within 3 business days of applying, shows an estimate. Your Closing Disclosure, which you get at least 3 business days before closing, shows the final number. Compare the two and ask about any big change.
Sources
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