This Is Exactly How Much Cash You Need to Buy a Home in 2026

A complete breakdown of every cost beyond the down payment , what it is, how much it runs, and precisely when it comes due.

Most homebuyers spend weeks researching the down payment. They know the percentage, they've run the math, and they feel ready. Then the first offer gets accepted , and the cash demands start arriving in waves. An earnest money deposit within three days. An appraisal fee the following week. Home inspection costs shortly after. Then, at the closing table, a stack of itemized fees that somehow didn't make it onto anyone's pre-purchase checklist.

This isn't a surprise manufactured by the industry. It's what happens when buyers understand the destination , the down payment , but not the journey. Buying a home is not one large cash event. It's a sequence of cash moments, each with its own timing, its own purpose, and its own rules about whether you'll get the money back if things fall through.

The goal of this guide is clarity. Walk through each cost in order, understand what you're paying for and when, and the process becomes far less stressful. That's true whether you're buying in Orange County, across Southern California, or anywhere else in the country. The specifics may vary by state, but the framework is universal.

Why Clarity Is the Most Powerful Tool a Homebuyer Has

There's a meaningful difference between stress caused by a difficult process and stress caused by an unfamiliar one. Home buying is not an inherently difficult process , millions of people do it every year. But it is deeply unfamiliar for most buyers, especially first-timers, and unfamiliarity breeds anxiety.

A thorough pre-approval, done properly, eliminates a substantial portion of that anxiety before it ever begins. A lender who takes the time to walk a borrower through a written estimate , showing the down payment, the closing costs, the prepaid items, and the approximate totals , removes the surprise factor. Buyers who go into a transaction knowing what's coming don't panic when the appraisal invoice arrives. They were expecting it.

The cash items we're covering here fall into two categories: costs that come before closing and costs that come at closing. Keeping that distinction in mind helps buyers plan their timing and manage their liquidity throughout escrow.

Before Closing: The Early Cash Moments

The Earnest Money Deposit (EMD)

When an offer is accepted, the buyer deposits a sum of money into escrow , typically held by a title company or escrow company , to demonstrate serious intent. This is the earnest money deposit, sometimes called the escrow deposit or EMD. In California, this deposit is due within three business days of contract acceptance.

In most California markets, an earnest money deposit runs between 2% and 3% of the purchase price. On a $600,000 home, that's $12,000 to $18,000 wired to escrow within the first few days. In competitive multiple-offer situations, sellers often push for deposits toward the higher end of that range , and in some cases, a seller's agent may write in a clause requiring the deposit within 24 hours or the contract is voided.

The deposit is almost always wired electronically from the buyer's bank account using escrow instructions provided by the title company. Some parts of the country still commonly accept cashier's checks, but wires are the standard in California and most of the West Coast.

Critically: the earnest money deposit is not an additional cost. Whatever is deposited into escrow goes toward the buyer's total closing funds. If a $600,000 transaction requires $30,000 in total cash to close, and $12,000 is already sitting in escrow as the earnest money deposit, the buyer brings $18,000 to the closing table , not $42,000. This is one of the most common points of confusion for first-time buyers, and it's worth understanding clearly before signing anything.

There's another important nuance: the EMD is generally refundable as long as the buyer is within their contingency periods. A buyer can walk away and recover the full deposit if the appraisal doesn't support the purchase price, if the loan falls through, if the home inspection reveals problems the seller won't address, or if seller disclosures contain information the buyer finds disqualifying , an HOA with underfunded reserves, for example, or a home with a history that concerns the buyer. In over 20 years of working with buyers in the Orange County and Huntington Beach real estate markets, an experienced listing agent will tell you it is extraordinarily rare for a buyer to actually lose an earnest money deposit when represented by a knowledgeable real estate professional.

The deposit only becomes the seller's money in one scenario: the buyer has released all contingencies, is within days of closing, and voluntarily backs out of the transaction. At that point, the seller has a claim to the deposit. Even then, it's often negotiated , a seller may return part of it as a goodwill gesture. But buyers should understand where that line is before they cross it.

The Appraisal

Once an offer is accepted, the lender will order an appraisal to verify that the home's value supports the loan amount. In nearly all cases, buyers pay for the appraisal upfront , not at closing. The appraisal management company sends a payment link by email, and the fee is typically paid by credit card within a day or two of the order being placed.

A residential appraisal in Southern California and most of the country runs between $600 and $700 for a standard single-family home or condominium. The fee varies by property type, location, loan type, and complexity. Appraisals on higher-value or more complex properties , larger square footage, unusual features, limited comparables , can run meaningfully higher.

The timing matters strategically for buyers who are tight on liquid cash early in escrow. Because the appraisal can be paid by credit card, it's one of the few transaction costs that doesn't require an immediate bank transfer. That said, this is not a cost to finance if it can be avoided. Buyers relying on credit to cover appraisal fees should view that as a signal to revisit their overall financial readiness.

If the transaction doesn't close , for any reason, including a low appraisal , the appraisal fee is gone. Unlike the earnest money deposit, it is not refundable. The appraiser performed the work; they get paid regardless of outcome.

Home Inspections

A general home inspection is a buyer's decision, not a lender requirement. But in over two decades of representing buyers in Orange County and Huntington Beach, a professional real estate advisor will strongly recommend one on every transaction , whether the home is a 1960s bungalow or a new construction property completed two months ago. Inspectors find things builders miss. They find things sellers aren't even aware of.

A general home inspection in Southern California typically runs $450 to $650 for a home under 2,500 square feet. Larger or more complex homes will cost more. The inspector evaluates the physical structure: plumbing, electrical, HVAC, roof, foundation, windows, and other visible systems. What a general inspection does not include: sewer line inspection, pool equipment, termite or pest assessment, mold testing, chimney inspection, or specialty systems.

The right approach is to start with the general inspection and let the inspector guide next steps. If the inspector flags a potentially failing HVAC system, a chimney with visible water intrusion, or aging pool equipment, follow-up specialty inspections get ordered at that point , not before. Each of those specialty inspections carries its own fee. Total inspection costs on a typical Orange County transaction might run $1,000 to $1,500 when specialty inspections are needed, though a straightforward home could be closer to $500.

Like appraisal fees, inspection costs are non-refundable if the deal falls apart. They represent real services rendered. Budget for them, expect them, and consider them an investment in knowing what you're actually buying.

At Closing: The Major Cash Items

The Down Payment

The down payment is the portion of the purchase price the buyer pays out of pocket, with the remainder financed through the mortgage. Down payment requirements vary significantly by loan program:

• Conventional loans: As little as 3% down for qualifying first-time buyers, more commonly 5%–20% depending on the borrower's goals and financial profile
• FHA loans: 3.5% minimum with a credit score of 580 or above
• VA loans: No down payment required for eligible veterans and active-duty military
• Jumbo loans: Typically 10%–20% minimum, depending on the lender and loan size

On a $600,000 purchase in Orange County at 5% down, that's $30,000. Remember: any earnest money deposit already wired to escrow comes out of this number at closing. The buyer doesn't bring the full down payment again , they bring the balance.

Closing Costs

Closing costs are lender and third-party fees associated with originating, processing, and completing the loan. Understanding what's in each category helps buyers evaluate loan estimates and avoid being misled by artificially low quotes.

Box A , Lender fees: These are fees charged directly by the lender: origination fees, underwriting fees, processing fees, and any discount points paid to buy down the interest rate. This is where the most meaningful variation between lenders exists. A lender offering a very low interest rate may be charging substantial points in Box A , increasing the loan balance while making the monthly payment look attractive.

Box B , Services the lender selects: This typically includes the appraisal fee and credit report fee. In most cases, Box B doesn't vary much between lenders , but buyers working with mortgage brokers should review it carefully, as some brokers include third-party processing fees here that other lenders absorb internally.

Box C , Third-party services: Title insurance, escrow or settlement fees, and related charges. These are largely determined by local market norms, not individual lenders. In California's escrow-state model, these fees follow a fairly standard structure. In attorney-closing states , primarily in the Northeast and parts of the Southeast , buyers encounter attorney fees that add to this category.

Beyond these three boxes, some states assess additional transfer taxes, mortgage taxes, or intangible taxes at closing that fall on the buyer. California is relatively straightforward on this front. Maryland, New York, and several Northeastern states can add meaningful costs here for non-first-time buyers.

A realistic rule of thumb for California buyers: closing costs typically fall between 1% and 1.5% of the purchase price. On a $600,000 home, plan for $6,000 to $9,000 in closing costs. The number can be higher in markets with elevated third-party costs, and lower in markets with fewer buyer-side charges.

Prepaid Items

Prepaid items are exactly what they sound like: costs paid in advance at closing for ongoing expenses associated with homeownership. These aren't fees for services rendered , they're deposits and advance payments required to establish an escrow impound account and ensure the home is properly insured from day one.

Prepaid interest: When a loan funds mid-month, the lender collects interest for the remaining days of that month at closing. A buyer who closes on the 15th of a 30-day month will pay 15 days of prepaid interest. A buyer who closes on the 28th pays 2–3 days. Because closing dates aren't known precisely during the planning phase, lenders typically estimate 15 days as a midpoint when generating estimates. Closing late in the month reduces this cost; closing early in the month increases it.

Homeowners insurance: The lender requires proof that the property is insured from the day of closing. The first year's homeowners insurance premium is collected at or before closing , either paid directly to the insurer or deposited into the impound account. For most Orange County and Southern California homes, this runs $1,000 to $2,000 annually depending on the property type, location, and coverage level.

Property tax reserves: If the buyer establishes a tax and insurance impound account , where the monthly mortgage payment includes a portion allocated to future property tax and insurance bills , the lender will collect a reserve cushion at closing. California property taxes are assessed semi-annually, so the amount collected depends heavily on where in the tax cycle the closing falls. Buyers closing shortly before a tax installment is due may be required to fund several months of reserves upfront; those closing just after a payment may fund less. Budget for 2–4 months of property taxes as an impound reserve.

Combined, prepaid items in California typically run around 1% of the purchase price. On a $600,000 home, that's approximately $6,000 , bringing the closing costs plus prepaids total to roughly $15,000.

Putting It All Together: A $600,000 Example

Here's how the complete cash picture looks for a California buyer purchasing a $600,000 home with 5% down:

A buyer who thought they needed $30,000 actually needs closer to $47,000 , and that gap doesn't have to be a shock. It shouldn't be. When a lender produces an accurate loan estimate at the start of the process and walks a buyer through each line item on a Zoom call or in-person meeting, the numbers stop being abstract and become a clear plan. The buyers who go through that process don't panic in escrow. They already know exactly what's coming.

"The buyers that go through the pre-approval process the right way , where everything is broken down in writing and they can ask real questions , those are the buyers who are calm throughout the transaction. They're not shocked at closing. They knew."

What Most Buyers Get Wrong About Closing Costs

The internet is full of rule-of-thumb advice suggesting buyers prepare 4%–5% for closing costs. In California, that's typically too high , and it can lead buyers to incorrectly believe they don't have enough money when they actually do. In practice, most California buyers find their total closing costs and prepaid items fall between 2% and 2.5% of the purchase price. Some markets add costs that push this number higher, but a buyer working with a knowledgeable local lender should receive a realistic number for their specific market , not a national average applied indiscriminately.

On the other side, buyers sometimes receive quotes from lenders that appear artificially low , until closer inspection reveals that Box A and Box B charges are understated, or that closing costs in a particular county or state have simply been omitted from the estimate. A trustworthy lender will provide estimates that accurately reflect all closing costs specific to the property's location, pull title fee schedules from actual title companies, and never pad numbers or hide them.

This is one area where working with a local specialist rather than a national call center lender makes a material difference. A loan officer licensed in and actively originating loans in California knows what to expect on a purchase in Huntington Beach or Anaheim or Irvine. A loan officer based in Ohio handling a California transaction for the first time does not , and the estimate will reflect that gap.

Strategies for Buyers Who Are Short on Cash

Being short on closing funds doesn't automatically mean the transaction can't work. There are several legitimate strategies for managing the cash requirement:

Seller concessions: In any market where sellers aren't fielding 15 offers, buyers can request that the seller contribute toward closing costs as part of the offer negotiation. On conventional loans, seller concessions are generally allowed up to 3% of the sale price. FHA allows up to 6%. VA has a specific 4% cap on certain items, though the actual allowable amount often exceeds that in practice. A seller concession means the buyer's net cash outlay at closing decreases without reducing the purchase price.

Inspection credits: Even buyers who didn't negotiate a seller concession upfront sometimes receive one during the inspection period. When a home inspection reveals significant issues, sellers often agree to credit the buyer for repairs rather than completing the work themselves. That credit can sometimes be applied toward closing costs, reducing the buyer's out-of-pocket requirement at closing. Buyers have occasionally entered escrow expecting to cover their full closing costs and exited with credits that effectively covered them , not because it was planned, but because negotiations unfolded that way.

Loan structure: The structure of the loan itself can influence how much cash a buyer needs at closing. Paying points to reduce the interest rate increases upfront cash requirements. Taking a slightly higher rate to reduce points reduces them. An experienced mortgage advisor will present both scenarios in writing and help buyers understand the break-even point , when does the monthly savings from a lower rate actually pay back the cost of the points? That math almost always favors keeping more equity and cash rather than buying down the rate.

The Right Process Removes the Stress

Homebuying stress almost always traces back to the same root cause: the unknown. Buyers who feel overwhelmed mid-transaction aren't dealing with a more expensive purchase than they expected , they're dealing with information they should have had weeks earlier. The earnest money deposit they didn't know would be wired within three days. The appraisal fee they didn't realize they'd pay by credit card before closing. The closing cost line items that no one ever explained line by line.

A thorough pre-approval process , one that produces a written loan estimate, walks through each cost category in plain language, and answers questions before they become emergencies , transforms the experience. Buyers who go through that process aren't just better prepared financially. They're better clients. They make decisions from a place of clarity rather than anxiety. They don't panic when the appraisal comes back low. They don't freeze at the closing table. They've already driven this road.

The same principle applies whether you're buying your first home in Huntington Beach or your third investment property in Orange County. The costs are knowable. The timeline is predictable. The process rewards preparation and punishes assumptions.

Strategic Summary: Who This Advice Applies To

This framework applies most directly to buyers who are actively planning a purchase in the next six to eighteen months , particularly those in California's higher-cost coastal markets, where a $600,000 starting price is often a floor rather than a ceiling. The cash requirements outlined here are real minimums for buyers in Orange County, Huntington Beach, and surrounding communities.

First-time buyers benefit most from understanding the complete cash sequence before beginning the search process. Walking into a buyer consultation knowing approximately what you'll owe and when , rather than discovering it mid-escrow , changes the entire emotional trajectory of the transaction.

The advice here is less applicable to buyers purchasing with all cash, buyers in very low-cost markets where closing costs and home values scale down proportionally, and buyers who have already completed a thorough lender consultation and received accurate written estimates.

For everyone else: the numbers are manageable, the timeline is predictable, and the process is survivable , as long as you go in with your eyes open and a qualified team around you.

Next Steps

The single most effective thing a prospective buyer can do right now is start a real conversation with a mortgage professional who will pull actual numbers , not national averages, not estimates built on assumptions , and put them in writing. That process produces clarity, and clarity produces confidence.

If you want to understand what buying right actually looks like for your specific situation, the income you have, the loan programs you qualify for, and the markets you're looking at, the path forward is straightforward.

Start here: www.theeducatedhomebuyer.com/start