How much money do you need to buy a house? Maybe you have heard you need a 20% down payment. Sounds like a good place to start. So let’s take this house we just picked out from Zillow and do the math.

This is a GREAT house. It has everything I want. I’m getting a great deal because it’s $9,000 off the original price!! Slow your roll, young buck. We’ll talk about how to determine a great deal later. For now we need to find out how much 20% is so we can whip out the Venmo and pick up the keys. Here’s the math:

$369,000 x 20% = $73,800. On the calculator it looks like this:

If you want to know know what decimal to use to calculate the percentage take the percentage you want and divide it by 100. For example 6/100 = .06. Then multiply the total by the percentage to find the down payment.

Most homeowners could not afford to put 20% down on a house and you probably won’t either, but that should not let that stop you from understanding how it works. You will use this same simple math to calculate other costs associated with buying a house and even maintaining it. So maybe this house is out of reach for most of us. What house can I afford to put 20% down?

Let’s say you have $13,000 saved up for your down payment. What house can you buy and still put down 20%? A little algebra from high school-the same class I asked the teacher what do I need to know this for-and we switch around our equation moving the percentage to the down payment side:

Max House I Can Afford x 20% = $13,000

$13,000 / 20% = Max House I Can Afford

$65,000 is the Max House I Can Afford. On the calculator it looks like this:

$65,000 won’t get us much. Certainly, not the dream house we saw on Zillow. But do not let that discourage you from saving up to buy a house. Most people do not put 20% down on a house, at least not on their own house. Just for fun add up all the money you paid your landlord and see what kind of house you could buy with 20% down.

Here’s a more realistic goal to set for yourself. 6% to buy your first house. Why six? Because your minimum down payment with an FHA loan is 3.5% as of today and closing costs range from 3-5% of the sale price of the house. If you are lucky, you can negotiate for the seller to pay most of your closing costs leaving you more money to put toward the down payment. But don’t count on it. Have the cash available so you don’t end up using your down payment to pay the closing costs!!

Now that you know how to do some quick math, play around with the numbers and see how much you need to save up for that first house.