REGION – Buying a home is a big deal. It’s one of the most significant financial milestones you can achieve, and the road to this huge win involves a crucial step: saving money for a down payment. The process of accumulating that initial lump sum can seem daunting, maybe next to impossible. But with the right strategies and a bit of discipline, you can become a homeowner.
According to a 2024 Zillow survey, 72% of homebuyers using a mortgage saved for a down payment on a house over time. How much they save varies; for the most common loan type, a conventional mortgage, first-time borrowers are required to save at least 5% of the home price for their down payment. For a typical home in the U.S., that’s a little more than $10K.
A common homebuying myth is that putting down 20% is the norm; that isn’t true any more. These days, most buyers put down far less than that. Nearly half (48%) of homebuyers using a mortgage reported putting less than 20% down on the home they purchased.
Here are tips on how to save for a down payment on a house, no matter your savings goal.
Figure out how much money you need
Before you start budgeting for your home goals, you’ll want to find out exactly how much money you need for a down payment. There are a few ways you can do this. In the first method, you’ll calculate your down payment based on the price of the home you want to buy, and in the other, you estimate how much you think you can save to find out if it meets your home shopping goals.
Here’s an example: You are dreaming about a home that costs $360,000, the typical U.S. home value as of October 2024. To put down 5%, you need to save $18,000.
Put a fixed amount in savings
With some planning and time, placing a little money into a savings account each month can be an extremely effective way to fund your down payment. To make that easier, you can set up automatic recurring withdrawals from your checking account to a savings account specifically for your down payment. Consider opening a high-yield savings account so you can gain more interest from the cash you’re putting in. It’s a low-risk investment that can help your funds grow.
Just remember to move money into your savings after you’ve figured out how much you can afford to save. Leave yourself with enough money to pay the bills, buy groceries, and to still treat yourself here and there.
According to the 2024 Zillow Group study, nearly three-fourths (72%) of home buyers using a mortgage reported funding at least part of their down payment with money they saved up over time.
Saving up for a down payment the old-fashioned way takes time. If you’re wanting to buy a house fast, saving for several years may not be an option – especially since a down payment is often a moving target. As the market changes, home prices can soar and cause the minimum down payment requirement to rise. Luckily, there are other options to help you get to your goal faster.
Get down payment assistance
It’s not always entirely on your shoulders to figure out how to save for a down payment. Certain mortgages and buyers qualify for down payment assistance programs. These are often funded by local government agencies or nonprofits, and they can be grants or loans. Federal Housing Administration (FHA) mortgages are compatible with many down payment assistance programs.
Your real estate agent or mortgage lender could recommend down payment assistance programs, or you can search for them on the Down Payment Resource Center.
That’s not to say these are your only options for down payment assistance. There are programs available at the city, county, and state levels as well, so do some research using your zip code and address.
Reduce your cost of living
There are a number of ways to achieve this, depending on your situation.
Although it might be a tough few months or so, downsizing your space, and therefore your monthly rent payments, might help you put away more money each month for your down payment. Living in a studio instead of a two-bedroom could bring some serious savings. Or find a cool roommate to live with. The savings could add up quicker than you think. Or, if you have friends, parents, or other relatives with a spare room, you might be able to pay little or no rent for a few months by staying with them.
Of course, finding a new place to live, as well as moving, are easier said than done. Alternatively, you can look at other monthly expenses where you can save money, like streaming services and subscriptions, could help you save money faster. And it’s temporary anyway. Just make sure you’re setting that extra money aside, so it doesn’t linger in your account and seem like money you can spend elsewhere.
Going to happy hour after work, or going to the movies on the weekend can certainly be fun, but cutting back on extracurriculars is an easy way to pocket more cash. Instead of going out to the movies, rent one from home or watch one you already have. If you’re missing the social aspects of going out, invite friends over for a game night.
You can also buy used instead of new items – vintage is all the rage these days. Or bust out that kiddie pool and your blender for some poolside pina coladas instead of planning a big vacation. Just remember: you’re doing this for your dream home, and these sacrifices won’t be permanent.
Add an additional source of income
The gig economy is still going strong. If you’re willing to put in a little more work on the weekends, or even after your regular day job, having a side gig could help you garner more cash. That could mean dog walking, waiting tables, or house sitting.
Do you have any special skills that could be a lucrative side hustle? Like photography, handyman work, or running a local business’ social media? That could be another way to make some extra money.
Start a gift fund
Aside from cutting back on your own spending, you can try to fund your down payment through gifted money. Many homebuyers have found luck asking friends and family for cash gifts towards their down payment in place of wedding gifts, birthday presents, or gifts for other occasions. In 2024, 38% of buyers with mortgages used gifts or loans from family members to finance some of their down payment.
If you’re engaged or might get engaged soon, know that it’s more popular than ever for engaged couples to ask friends and family for cash instead of traditional wedding gifts. The share of couples adding a home fund to their wedding registry has increased 55% compared to five years ago, according to research from The Knot. Now, nearly 20% of all couples who are registered on The Knot are creating down payment funds; in 2022, it was the second most popular cash fund – right behind the beloved honeymoon fund.
Don’t let that down payment discourage you. You can make home a reality with some research and savvy. Find more resources for your homebuying journey below.
Provided by Zillow.