The American dream for many of us is buying a home, which may be the most significant purchase and important investment in our life. When buying a home, most of us will need to get a mortgage, so we’ll also need strategies to save for a down payment.
How Much Money Do You Need for a Down Payment?
Most people do not make a 20% down payment on a home. On average, Americans pay a down payment of around 10%, with many paying much less.
- Conventional home loans require a 5% down payment.
- FHA (Federal Housing Administration) home loans require a 3.5% down payment.
- VA loans offer competitive rates with low or no down payments and don’t require mortgage insurance.
- The USDA Rural Development Guaranteed Housing Loan Program offers mortgages with no down payment and allows you to finance 100% of the property value.
- Several government programs offer down payment assistance for first-time homebuyers, so it is always good to check current programs by local and federal agencies.
Most importantly, start working with a mortgage broker early in the process, so you can learn how much you need to save for a down payment.
Related:
- Down Payment Options to Buy a Home
- Low Down Payment Mortgages Allowing Buyers to Purchase a Home Years Sooner
- You Don’t Need a 20% Down Payment for a Home Mortgage
Methods of Saving for a Down Payment
Money saved toward a down payment needs to sit in a secure account. Here are a few things to consider:
- Risk Tolerance: To save money more quickly, homebuyers may choose an account with a higher risk in exchange for higher returns, such as a brokerage account invested in tech stocks. However, the volatility of the account could result in losing money. Lower-risk accounts, such as a bond fund or a savings account, can offer a stable place to save money to ensure that it is there when needed for the down payment.
- Accessibility: Down payments should be easily accessible when it’s time to purchase the property. Consult your mortgage broker for a strategy of transferring funds so that they qualify for the down payment.
- Timeline: A timeline should be considered regarding when the buyer intends to purchase the home. Some financial accounts have penalties for early withdrawal.
Depending on the above factors, homebuyers may choose to hold money in one of these places:
- Traditional Savings Account: A savings account offers the most stable place to save for a down payment. It’s insured by the FDIC or NCUA and offers a low-risk option.
- High-Yield Savings Account: This type of savings account offers a higher interest rate. It is still insured by the FDIC or NCUA but offers a much higher variable interest rate when compared to a regular savings account. High-yield savings accounts are low risk but may lack some of the easy accessibility due to being more common with online banks instead of physical banks.
- Certificates of Deposit: This option allows the depositor to leave a set sum of money with the bank or other financial institution in exchange for a stable, non-volatile return. Money is available for withdrawal after the period of investment is over, though the account usually includes a penalty for early withdrawal. Certificates of deposit are available with a large variety of investment periods and interest rates to match your requirements.
- Investment Account: Any type of stock or bond investment account can be used to save and grow money for a down payment. Bonds are generally considered low risk, while stocks are higher risk with higher growth potential. Homebuyers may consider investment accounts early on before switching to a more stable account type closer to the purchase date.
Down Payment Saving Tips
When you know how much you need to save for a mortgage down payment, commit yourself to a budget that includes saving for the down payment. Here are some tips to help you save.
#1 Commit to Saving Goals
Set goals for your savings and track your progress. Include a timeline, so you know when you should meet again with your mortgage broker to be pre-approved for a mortgage and meet with your Realtor to start searching for a home.
Break down the total you want to save for a down payment into the number of monthly payments to match your timeline and deposit that amount in your savings every month.
#2 Increase Your Income
While you may not be able to increase the income from your current job, look for other sources of income to boost your earnings. For example, there are many options today with the gig economy, such as driving for a rideshare company or delivering food in your spare time, which can add a considerable amount of money toward your down payment.
Taking on a second job may be another option for increasing income. Especially during the holiday season, many well-paying temporary positions open up that can serve as a good source of extra income.
#3 Automatic Withdrawals
Saving for a down payment involves discipline and consistency. The best way to ensure both of these is to automatically withdraw a set amount from your account each month. Automatic withdrawals take the money out of your account before you are tempted to spend it or use it for something else.
#4 Reduce Expenses
Reducing expenses is another way to free up more cash for savings. First consider unnecessary expenses you can reduce or limit, such as dining out or buying new clothes.
If you can reduce your total expenses each month by even $100, that’s $1200 each year toward your down payment, which can add up quickly as you also generate additional income.
#5 Divert Other Investments
Homes are an investment. If you are already setting aside money in an investment account, consider diverting some or all of that money into saving for your down payment. It’s a short-term diversion until you have saved for the down payment.
Marimark Mortgage
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We help homebuyers determine how much they need to save for a down payment while explaining the down payment options available to them.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us directly for advice about down payments for home loans.

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