To pay for real estate transactions, buyers typically use cash, mortgage loans, or a combination of both. A mortgage involves a down payment (usually 5-20% of the purchase price), closing costs (1-5% of the loan amount), and monthly payments covering principal, interest, taxes, and insurance ( escrow). Title insurance and hoa fees are also required.

Mortgage financing dominates U.S. real estate purchases due to lower upfront costs and tax benefits. The Federal Reserve reports 90% of homebuyers finance purchases in 2023, with average down payments at 20% (National Association of Realtors). Closing costs average $5,000-$15,000 (U.S. Department of Housing and Urban Development), while escrow accounts hold 0.5-1% of the loan monthly. Title insurance, averaging $1,000, protects against ownership disputes. Cash buyers face higher competition in competitive markets, as only 10% of transactions are cash-based (Zillow, 2023). This financing structure balances affordability and risk management, aligning with long-term wealth-building goals.