Saving for a down payment to buy a house can feel like an insurmountable task. Between recurring monthly expenses, the costs of daily life, and paying down debt (which, statistically, most people in the United States carry in some form), it can feel like there’s just not enough money coming in to save for a house down payment.
But with record-low interest rates and a smattering of first-time buyer programs available, 2022 really could be a great time to buy a home — and it might be a more attainable prospect than you think.
Going beyond the everyone-knows-that tips to pack your lunch and make coffee at home, we’re offering actionable advice on how to save for a house down payment fast. And to help, we’ve brought in real-world financial and real estate experts to share their insights on how to save and how to maximize your down payment funds.
Give your piggy bank a shake, and let’s get started!
What’s a down payment?
We’re not trying to insult anyone’s intelligence here, but it’s worth giving a quick overview as to what exactly a house down payment is — and why lenders usually require one.
A down payment is the cash you’ll provide at closing that applies directly to your purchase. Because home prices and down payment amounts vary widely, the number is usually spoken of in terms of a percentage of the purchase price of the house. Putting down anywhere between 3% and 20% of the home’s purchase price is common, though there are some loan programs that will let you put 0% down.
Lenders want to see that you’re capable and willing to repay your loan, so a down payment serves as a credible up-front investment. How much you’ll need to put down when buying a house will depend on several factors, including:
- Your credit history and credit score (the higher, the better!)
- Your income
- The purchase price of the home
- The type of loan you’ll be using (different loan types have different requirements)
And, of course, how much you want to put down is another consideration. Your loan may only require a 3.5% down payment, but perhaps you’d like to put down 10% to gain a more favorable interest rate, or simply to borrow a smaller amount of money through your mortgage.
It’s never too early to have a conversation with a lender to find out exactly what you’ll need to save for a down payment.
- Mike Smallegan
Real Estate Agent
Real Estate Agent at Keller Williams Grand Rapids
Currently accepting new clients
- Years of Experience
- Average Price Point
- Single Family Homes
When should I talk to a lender?
An experienced, trustworthy mortgage lender will review your financial situation and help you determine which types of loans and loan programs will best suit your needs. Just as when you’re looking for a great real estate agent, it’s perfectly fine to shop around and speak with several different people until you find the ones you “click” with.
You should feel totally comfortable asking lots of questions of both your agent and your lender — and you don’t necessarily have to wait until the very moment you’re ready to start shopping for a house.
“It’s never too early to have a conversation with a lender to find out exactly what you’ll need to save for a down payment,” says Mike Smallegan, a real estate agent based in Grand Rapids, Michigan, who works with 80% more single-family homes than the average agent in his area.
He notes that buyers should be aware that mortgage interest rates can and will change, and that interest rates help determine not only how much you’ll need as a down payment, but also how much you can afford when it comes to the purchase price of your future home.
“I always want my buyers to understand what it’s going to take to purchase a home in the current market, but also to be aware that interest rates will change,” says Smallegan. “Buyers need to be in communication with their agent and their lender as they save up for a down payment.”
How much do I really need for a down payment?
As we’ve mentioned, down payment amounts can — and do — vary widely. But we can say this: You don’t have to put down 20%, and it’s even possible to put down no money at all.
Though 20% has long been considered the “standard” down payment amount, it’s not a requirement. It’s very possible to secure a mortgage with just 3% down — even if you’re a first-time homebuyer — and there are viable options for zero down payment loans, too.
Mortgage insurance is generally required on conventional loans on which your down payment is less than 20% — and it’s always required on FHA loans. Usually coming in at an annual cost between 0.5% and 1% of the loan amount, MI protects the lender if you stop making payments on your loan.
You can request for MI to be removed from your mortgage once you’ve reached 20% equity in your home (provided you use a conventional loan), but it is an added expense that will increase your monthly mortgage payment until that time comes.
So, all told, the best way to figure out how much you’ll need for a down payment is to assess what house you can afford and which loan type will work best for you — with the help of a lender.
Which loans have the lowest down payment requirements?
At the risk of sounding like a broken record, a lender will always be your best source for the most up-to-date information on loan requirements and availability — but for the sake of example, let’s imagine you’re in the market for a $350,000 home.
If you’re using a conventional loan to buy a home — in other words, a loan that is not backed by the federal government — either 3% or 5% is a common down payment requirement.
Your credit score and income will determine the required amount down. For our $350,000 home example, this means you’ll need to be prepared with between $10,500 and $17,500 to put down.
Buying your home with an FHA loan is a great option if your credit score still has room for improvement — the down payment requirements are low, and qualification terms are a bit more forgiving.
At a 3.5% down payment on your $350,000 home, you’ll need to bring $12,250 to the closing table.
A USDA home loan applies to purchases in qualifying rural areas. There is an income limit (in 2021, this was $91,900 for a household of up to four people), and your credit score will need to be at least 640, but there’s no down payment requirement.
For current and former service members, a VA loan may be an option. You’ll need to prove your eligibility and have a qualifying credit score as determined by the lender. With a VA loan, there is no down payment requirement, meaning you can put zero down.
What other homebuying expenses should I consider?
Your down payment isn’t the only element you’ll need cash for when it comes to buying a home.
Though expenses will vary depending on your location and the terms of your purchase agreement, there are a few additional expenses that seem to be an inevitable part of the homebuying process.
Closing costs are the fees paid at the closing of your purchase. This is when you’ll need to provide your down payment, and pay any additional costs that are not covered by the seller.
Closing costs are usually between 2% and 5% of the purchase price, and they may include line items such as:
- Title review
- Title insurance
- Property taxes
- Inspection fees (if these weren’t paid at the time of your home inspection)
- Transfer tax
- Attorney fees
- Escrow fee
- Lender fees
- Homeowners association transfer fee
- Real estate agent commission (fortunately, this expense is usually on the seller!)
Your agent can give you more insight into what are common closing costs in your area, and you’ll receive the Closing Disclosure document generally three days prior to closing.
Moving doesn’t have to be miserable, but it is a huge task and can quickly become expensive. Even if you own a truck or a van and move everything yourself, it’s unlikely that you’ll find a way to move entirely for free.
Consider the cost of boxes, packing tape, cleaning supplies, food and drinks to bribe your friends into helping, and the cost of gas to go back and forth between homes.
There are ways to make your move easier, but hiring professional movers is definitely the most efficient way to get the job done. Moving companies typically have multiple levels of service, from showing up on moving day to relocate your stacks of boxes, to actually doing the packing and unpacking for you. But it isn’t cheap, so you’ll want to shop around well in advance.
Even if you’re moving to a home of equivalent size to your current residence, there’s sure to be something about the room configuration — or the very human desire to begin anew with fresh decor — that demands new furniture.
Maybe you’ll need shelving in a corner of your home office, maybe your sectional sofa doesn’t actually work with the new space as well as you thought, or perhaps you’ll suddenly realize you’ve had the same IKEA dresser for the past 10 years and you can’t stand the sight of it any longer.
Whatever the case, it’s best to do yourself the favor of budgeting for a few new pieces of furniture and home decor once you’ve moved.
18 tips to save up for a house down payment fast
But remember that calculators are just a jumping off point — they’re not a substitute for professional advice!
Once you have some actual numbers to refer to, it’s time to get down to the business of saving money fast.
1. Set a timeline
First things first: You’ll want to make a plan.
On paper (or spreadsheet), figure out your monthly budget by accounting for all current expenses and income. Determine how much you can realistically save each month based on these initial numbers, then do the math to determine how long it will take you to save up for your down payment.
Ideally, you’ll both cut your expenses and increase your income during your savings period, but creating this timeline is a good frame of reference for understanding the numbers.
2. Cut out unnecessary expenses
Yep, this is where you’ll usually see suggestions for skipping the fancy coffee shops and making avocado toast at home — and while it’s true that these smaller expenses do add up, trimming the real fat of your budget goes deeper than eliminating extracurricular snacks.
Cancel subscription services
If you subscribe to any programs that involve receiving a box of “stuff” each month — think beauty samples, pet toys, vitamins, razors, and so on — put those on hold or cancel them entirely.
Not only will you save money on that monthly cost, you’ll help make your own packing process easier when you have less accumulating items to go through.
Cut back on streaming entertainment
Look, since saving money almost always involves going out less and staying in more, we’re not necessarily going to tell you to drop your Netflix subscription. Maintaining some form of at-home entertainment is important — but do you really need to subscribe to three or four different streaming services? Pick one, and then pause or cancel the rest.
Same goes for any listening and reading subscriptions you might have. Can you drop your Audible subscription for a few months and instead borrow audiobooks through an app (like OverDrive) and your local library? You can do the same with ebooks!
Frequent discount grocers
If you have one in your area, try grocery shopping at Aldi or Trader Joe’s. Ask friends or coworkers if they have a Costco card you can borrow (or just tag along on their next visit) to stock up on frequently used items at a reduced price.
Regardless of your preferred venue, most “big” grocery stores have a loyalty program that is free to join and allows you to collect points and benefit from members-only discounts — take advantage!
3. Assess your spending habits
Once you’ve eliminated the obvious extras in your budget, it can be challenging to discern where else you can cut back.
Grab a highlighter and take a look at your bank and credit card statements from the last three months. Highlight anything that seems even vaguely unnecessary or that you don’t remember buying in the first place. Are any patterns emerging?
Maybe you’re stopping by that upscale pastry shop more often than you realized, or perhaps it’s become clear that you’ve added to your houseplant collection four times in the last three weeks.
We’re all allowed our hobbies and indulgences, but when you’re saving for a house down payment, ask yourself where you can make a short-term sacrifice for a long-term gain.
4. Designate a down payment savings account (and automate!)
Your checking account is probably tied to a generic savings account through your bank and credit union. This is fine, but it’s probably not your best bet for saving your down payment.
“Establish a separate savings account and use it exclusively for your down payment,” says certified financial planner Alex Williams. “By keeping this money separate, you’ll be less likely to tap into it when you are tight on cash.”
Williams also recommends automating your monthly savings contributions. By not having to think about and take the time to manually transfer money into your down payment savings account, you eliminate the risk of using that money elsewhere.
Bonus points if you rename the account from the bank-generated label of “SAVINGS—0314” to “House Fund” or “House Down Payment” to keep you focused.
5. Consider pausing retirement contributions
You may want to consult a financial planner — or even your lender — for advice on this one, but it could be worth pausing your retirement contributions in favor of routing those funds to your down payment savings account instead.
It might even be possible to take out a loan on your 401(k) to speed up your down payment acquisition, but do be aware of possible tax implications or not-worth-it investment losses.
Advantages of borrowing from your own retirement savings can mean a faster path to buying a home, and there may be very little or no cost for accessing those funds. Repayment options are often flexible, and there’s generally no hard inquiry to your credit while pursuing the loan.
But, again, this is a savings option that is best to review with a professional before taking action.
6. Can you downsize?
Moving is expensive, and rent prices are increasing in many areas around the country, so this may not be the most practical idea on this list — but if there’s an opportunity for you to move into a less expensive home without committing to the space long-term, you could drastically reduce your time spent saving up for a down payment.
Rather than signing a formal lease on an apartment, consider reaching out to family or friends who may have an extra bedroom or a finished basement available. They could make a few hundred extra bucks for a few months while you save for your down payment even faster. Win-win!
7. Ask your landlord for a break
In lieu of moving before you move again, try talking with your landlord and seeing if there are any opportunities for saving money.
Maybe they’ll cut you a break on pet fees, or maybe you can take over a task like mowing the lawn or removing snow in exchange for a discount on your rent.
8. Request a raise at work
While asking your boss for a raise on the grounds that you’re saving for a house isn’t the most professional tactic, if it’s been a while since your last bump in pay — or if you’ve recently completed a big, well-received project — it may not be out of bounds to ask about a raise.
Put together a list of your accomplishments over the last several months, compile any meaningful praise (always save those “Wow, great work on this!” emails!), and use resources like Glassdoor, Payscale, and Salary.com to bring weight to your request.
9. Or, find a new job?
Sometimes the best way to get a raise is to find a new job entirely. Though starting a new role at the same time you’re trying to buy a house may not be the most relaxing time of your life, it could ultimately pay off.
Consider your line of work and determine if it may be possible for you to leverage the 2021 labor shortage to your advantage and snag a higher-paying job.
10. There’s always a side hustle
There is no shortage of options for a part-time gig these days. Whether you take on freelance graphic design work, start selling your pandemic-perfected sourdough boules, or pick up a few shifts a week at your neighborhood cafe, adding to your income can help bolster your savings quickly.
“One of the most effective ways to save money for a down payment is to get a side job,” says financial expert Greg Rozdeba. “The extra income can be put entirely toward your down payment, while your original income source can be used for daily expenses.
“Though it’s harder to do, this method is the most effective.”
While it’s tough to estimate how much you could theoretically earn working part-time, if you live in a state with a $15.00 per hour minimum wage, picking up even just 10 hours a week can bring in an extra $600 per month.
11. Rent out your space
If you live in an area that receives frequent visitors, you could earn extra cash by putting your home (or part of it, if you have a spare bedroom) on Airbnb.
12. Sell off big-ticket items
You’re going to move anyway, so if there’s anything in your current home that you’re planning to sell while relocating, why not do it now and put that cash in your down payment fund?
Use a discerning eye to look over your furniture, sporting goods, electronics, collectibles, and designer clothing, and then decide which pieces you can bear to part with. Platforms like craigslist, eBay, Poshmark, Nextdoor, and thredUP make it easy (and secure) to sell your stuff online with minimal effort.
13. Hold off on major purchases
This probably goes without saying, but now isn’t the time to take a luxurious vacation, buy a new car, or upgrade your TV.
Keep your spending low while you’re saving for your house down payment, and know that these restrictions are only temporary!
14. Strategically pay off debts
As with the question of pausing retirement contributions, your debt repayment strategy is best discussed with a professional, but carrying less debt helps you qualify for a larger mortgage. (And, in a broader sense, it lessens your financial stress.)
Whether you should prioritize down payment savings or paying off debt really depends on the debt itself. High-interest debt — think credit card debt — you’ll typically want to get off your plate as quickly as possible. Other debts, like student loans or auto loans, may be more sensibly regulated to minimum payments while you temporarily route extra cash to your down payment.
15. Polish up your credit score
A period of intense savings is also a great time to work on your credit score. You’ll be spending less money and be more in tune with what you are spending, so this is a real opportunity to look into what it takes to bring your score up from good to very good.
A higher credit score means a lower interest rate, which saves you money over the long term.
In general, paying your bills on time and keeping your debt-to-income ratio below 45% (including your new mortgage payment) will keep your score in great shape!
16. Get help from a family member
If it’s an option for you to get financial help from a family member, now is a good time to have that conversation. Gift money from relatives is often allowed, but loan regulations may require that it matures in your checking account for some time before it can be applied to your down payment.
17. Research down payment assistance programs
There are programs nationwide (and potentially locally) that can help you maximize your down payment — sometimes even in the form of a grant that you won’t have to repay.
Your lender or real estate agent will be able to offer suggestions, but you can start your search by Googling “down payment assistance [city, state]” to see what’s out there.
18. Don’t give up!
The process of saving for a house down payment — especially in a short amount of time — will undoubtedly be less exciting than your usual way of life. But don’t get discouraged! Remember, this is only temporary, and the sacrifices will be so worth it when you’ve closed on your house.
Keep your eye on the prize, save that cash, work with a great agent and a great lender, and know that you’ve got this!
Header Image Source: ( Ethan Howard / Unsplash)