How Much Should You Save for a Down Payment on a Home?
Saving for a down payment is one of the most important—and often most challenging—steps in the homebuying journey. Whether you're a first-time buyer or planning your next move, understanding how much you need to save can help you set realistic goals and avoid surprises.
In this blog, we’ll break down how much you should save for a down payment, the different options available, and tips to help you reach your savings goal faster.
What Is a Down Payment?
A down payment is the initial upfront portion of the home’s purchase price that you pay out of pocket. The rest is typically financed through a mortgage loan. The size of your down payment affects your loan amount, monthly payments, and whether you'll need to pay for private mortgage insurance (PMI).
How Much Should You Save for a Down Payment?
There’s no one-size-fits-all answer, but here are the most common down payment benchmarks:
1. 20% Down Payment (Traditional Standard)
The golden rule many buyers hear is to put down 20%. Here’s why this figure is popular:
No PMI: Lenders typically waive private mortgage insurance when you put down at least 20%.
Lower monthly payments: With less to finance, your monthly mortgage bill is reduced.
Stronger offer: A large down payment can make your offer more attractive to sellers.
Example: On a $400,000 home, 20% would be $80,000.
2. 5% to 10% Down Payment (More Common Today)
Many buyers, especially first-time homeowners, opt for a smaller down payment. Conventional loans often allow as little as 5% down.
Pros:
Faster entry into the market
Allows you to buy sooner if you don't have 20% saved
Cons:
You’ll likely pay PMI
Higher monthly mortgage payments
Example: On a $400,000 home, 5% is $20,000.
3. 3% Down Payment (First-Time Buyer Programs)
Some conventional loan programs, like Fannie Mae’s HomeReady® or Freddie Mac’s Home Possible®, offer qualified buyers the chance to buy with just 3% down.
Example: On a $400,000 home, 3% is $12,000.
4. 0% Down Payment (VA and USDA Loans)
Eligible military members or buyers in rural areas may qualify for special government-backed loans that require no down payment at all.
VA Loans: For veterans, active-duty service members, and some surviving spouses.
USDA Loans: For low- to moderate-income buyers in designated rural areas.
What Else Should You Budget For?
A down payment is just one part of the equation. Consider these additional costs:
Closing costs: Typically 2%–5% of the home price.
Moving expenses
Home inspection and appraisal fees
Repairs or upgrades after move-in
Emergency fund for unexpected costs
Tips to Help You Save for a Down Payment Faster
Set a clear goal. Know your target number and timeline.
Open a dedicated savings account. Keep your down payment fund separate to avoid dipping into it.
Automate savings. Schedule recurring transfers from your checking to your savings account.
Cut unnecessary expenses. Redirect funds from subscriptions, dining out, or impulse purchases.
Explore assistance programs. Local and state programs may offer down payment grants or loans.
Final Thoughts
How much you should save for a down payment depends on your financial situation, the price of the home, and the type of loan you qualify for. While 20% offers more advantages, don’t let it stop you from entering the market if you’re ready. With multiple loan programs and assistance options available, buying a home may be more achievable than you think.
If you’re unsure how much you need or which loan program is right for you, reach out to a trusted mortgage advisor or real estate professional. They can help you map out a personalized path to homeownership.
Looking to Buy a Home Soon?
Let’s connect and find out what’s possible for your budget. Whether you’re months away or just starting to plan, I can help you every step of the way.
