How Much Money Do I Really Need to Buy a House in Bloomington, Indiana?

If you're thinking about buying a home in Bloomington, Indiana, you may have already heard the magic number:

“You need 20% down.”

Good news: that’s not necessarily true!

One of the most common questions I hear from buyers—especially first-time homebuyers—is, “How much money do I actually need to buy a house?”

The answer is a little more complicated than simply picking a down payment percentage. But don’t worry—I promise we can make it much less confusing.

I’m Heather Bozarth, a Senior Mortgage Loan Officer with Ruoff Mortgage in Bloomington, and I spend a lot of time helping buyers figure out exactly what it will take to get from “I’m thinking about buying” to “I have the keys!”

Here’s what you should know:

You may not need 20% down

This is probably the biggest misconception I hear.

Depending on the loan program you qualify for, your down payment could be significantly less than 20%.

There are conventional loan options with low down payments, FHA financing with low down or no payment requirement, and VA financing that can offer eligible veterans and service members the ability to purchase with no down payment.

There may also be down-payment assistance and other homebuyer programs available depending on your situation and the property you're purchasing.

So if you’ve been thinking, “I can't afford a house because I don't have $60,000 sitting in my savings account,” don't automatically cross homeownership off your list.

Let's run the numbers first.

Your down payment isn't the only cash you'll need

This is where things get interesting.

When you're buying a home, there are several different pieces that can make up the money you'll need to bring to the table.

1. Down payment

This is the portion of the home's purchase price you're paying upfront.

The amount depends on the loan program and your individual circumstances.

And remember: 20% is not the automatic requirement.

2. Closing costs

Closing costs can include things such as lender fees, title and settlement costs, recording fees, prepaid taxes, homeowners insurance and other expenses associated with purchasing your home.

The exact amount varies from transaction to transaction.

This is one reason I like to give buyers an estimate of their total cash needed, rather than simply saying, “You need X% down.” It is common in Southern Indiana to ask the sellers to pay this.

3. Earnest money

When you make an offer on a home, your purchase agreement may include earnest money.

Think of it as putting some skin in the game while you're moving toward closing.

Your earnest money generally isn't an additional expense on top of everything else. In many cases, it can be applied toward your cash needed at closing, depending on the terms of the transaction.

4. Home inspection and other upfront expenses

You'll also want to budget for things that may happen before closing, such as a home inspection.

Depending on the property and your situation, there could