How Much Should You Save for a Down Payment?

Deciding to start seriously saving for a home is incredibly exciting, but for first-time homebuyers, you’re probably wondering just how much you need to save. In the past, most buyers stuck with the rule that you should have at least 20 percent of the total price saved for the down payment. However, the median down payment is actually only 14 percent, and first-time buyers can even get away with putting down much less than that. Of course, the higher the price range of homes you’re looking at, the more money you’re going to have to save. You may find that looking for homes in a lower price range will allow you to own sooner than if you were trying to save for a more expensive property.

If you’re in a position where you’re able to put 20 percent down, you might consider doing so even though most lenders don’t require it. Putting down that much could lead to a better interest rate, ultimately saving you money in the long run. Your monthly payments will be smaller, freeing up more of your budget, which could be particularly helpful if you need to make repairs or want to renovate your new home.

Again, it is typically not necessary to save that much for a down payment, which is a relief because for first-time buyers that can often seem like an impossible number and trying to save that much money up before purchasing could put their plans of homeownership on hold for quite a long time. It’s important to go into the process with a clear understanding of your finances. Consider your income, how much of your savings you’ll have left for emergencies after your down payment, and what your monthly expenses will look like with your new mortgage factored in. A pre-approval letter from a lender will give you a clear picture of how much you’ll be able to borrow, and spend, on a home.

There are homebuyer assistance programs to explore and FHA or VA loans that allow you to put even less money down. A home is the biggest and most important purchase of most people’s lives, but it’s not as daunting as it may seem. A knowledgeable real estate agent can help you assess your goals and put you on the best path to reach them, exploring your options and connecting you with valuable resources.