Facts and figures can change
The number first-time buyers actually need is almost never just the down payment. Here's the full, honest breakdown.
The short answer: it depends, but here's the real breakdown
There's no single number that applies to every buyer, because it depends on your loan type, home price, and local costs. But almost every first-time buyer in Michigan is budgeting for the same categories of cash: a down payment, closing costs, a home inspection, prepaid expenses, and ideally some reserves left over. Let's go through each one.
Down payment: often smaller than people expect
A lot of first-time buyers assume they need 20% down, but that's not actually a requirement for most loan programs — it's simply the threshold where conventional loans typically stop requiring private mortgage insurance (PMI). Many first-time buyers use loans that allow 3%, 3.5%, or in some cases 0% down, depending on eligibility. The right number for you depends on the loan type your lender recommends based on your situation.
Closing costs: the part people forget to plan for
Closing costs are fees paid at closing beyond your down payment — think lender fees, title fees, recording fees, and similar charges. These commonly land somewhere in the range of 2–5% of the purchase price, though your specific costs depend on your lender, loan type, and location. Your lender is required to give you a Loan Estimate early in the process that itemizes these for your specific loan.
Home inspection costs
A home inspection is paid directly to your inspector, separate from your closing costs, and typically runs a few hundred dollars depending on the size and age of the home. This is money well spent — it's your chance to understand what you're actually buying before you're financially committed.
Prepaid expenses and reserves
Lenders often collect the first several months of property taxes and homeowners insurance upfront to start your escrow account, which shows up as a prepaid cost at closing. Beyond that, we'd suggest keeping a separate reserve available after closing — money that isn't part of your down payment or closing funds — since homeownership comes with maintenance costs that renting typically doesn't.
Try it with your own numbers
Every buyer's situation is different, which is why we built a free calculator that lets you plug in an actual home price and down payment to see an educational estimate of your total cash needed. It won't replace your lender's official Loan Estimate, but it's a useful starting point for planning.
Frequently asked questions
Some loan programs, like VA and USDA loans, can allow 0% down for eligible borrowers in eligible situations. Eligibility depends on factors like military service history (VA) or property location and income (USDA) — a lender can confirm what you actually qualify for.
20% down is the common threshold to avoid private mortgage insurance (PMI) on a conventional loan, but it isn't required to get a mortgage at all. Many first-time buyers put down significantly less.
See what this looks like with your numbers
Try our free mortgage and cash-to-close calculators.
Sources
- Conventional Loans — Consumer Financial Protection Bureau
- Buying a Home — U.S. Department of Housing and Urban Development
Ashten Tucker
Founder, First Keys · Michigan Realtor
Ashten founded First Keys after seeing how overwhelming the homebuying process can feel for first-time buyers. He writes to make mortgages, contracts, and closing costs make sense in plain English.