We Get Asked This A Lot....

by Shawn Murphy, GRI, SRES

We hear it all the time: “How much money do I actually need to buy a home?”
It’s one of the biggest questions — and one of the most misunderstood topics — when it comes to homeownership. So let’s break it down in a clear, realistic way for buyers in Minnesota, Wisconsin, and Michigan.

🏡 1. Down Payment — The Big One

This is the portion of the home price you pay upfront and don’t borrow.

✔️ Typical range: 3% to 20% of the home price (and sometimes more). That depends on your loan type and goals.
✔️ Minimums:

Conventional loan: as low as 3%
FHA loan: 3.5%
VA / USDA loans: 0% (for eligible buyers)
✔️ For many buyers in these states, most real-world down payments fall between 5% and 20% depending on program and resources.

Let’s look at median home prices in each state as a ballpark for what that could actually cost you:

📍 Minnesota – median around $380,000–$390,000
📍 Wisconsin – median around $350,000
📍 Michigan – median around $290,000
(Data from recent Redfin/Forbes median home price reports)

💡 Example:
If you’re buying a $380,000 home in Minnesota

5% down = $19,000
10% down = $38,000
20% down = $76,000+

Those numbers are all before closing costs and other fees.

💼 2. Closing Costs — The Often Overlooked Expense

You don’t just bring your down payment — you also bring closing costs at the end of the homebuying process.

These cover things like:
✔️ Loan origination fee
✔️ Title insurance & search
✔️ Appraisal
✔️ Escrow & recording fees
✔️ Prepaid taxes & insurance

What to expect:
📍 Minnesota: Typically around 1–1.5% of the home price
📍 Wisconsin: Around 1.4–1.5% of the home price
📍 Michigan: Around ~1–2% of the home price
(Actual costs depend on home price, lender, and local taxes)

💡 That means on a $350,000 home, closing costs could easily be $3,500–$7,000+ — money you need in addition to your down payment.

🔎 3. Other Cash-to-Close Items

When your loan officer gives you a “cash to close” number, it isn’t just your down payment + closing costs. It can also include:

✨ Earnest money deposit – often 1–2% of the purchase price
✨ Prepaid homeowners insurance
✨ Escrow deposits for taxes and insurance
✨ Home inspection & appraisal fees
✨ Any points you buy to lower your rate

These totals can sometimes surprise first-time buyers — and that’s why working with a lender early is so important.

🧾 **4. The Reality of Saving**

It’s easy to look at a home price and think “I just need 3% down.” But here’s what most buyers actually end up saving for:

✔️ Down payment
✔️ Closing costs
✔️ Prepaids / escrows
✔️ Inspections & moving costs
✔️ A little cushion for repairs or upgrades after closing

A balanced budget usually includes at least 3–6 months of mortgage payments in reserve after you close — so you’re not house-poor when you move in.

🧠 5. Bottom Line

Buying a home is a major life investment, and the dollars you think you need upfront don’t always tell the whole story.

Here’s a simple way to think about it:

🏠 Home price → down payment (3–20%+)
📑 Closing costs → 1–2%+ of price
📌 Other fees → appraisals, inspections, escrows
💵 Reserves → money left after closing for peace of mind

Saving for a home isn’t just about the down payment — it’s about being prepared, informed, and confident when you walk into the closing table.