How to Save for a Down Payment on a House
You don't always need 20% down — but you do need a plan. Here's how much a down payment (and closing costs) really takes, where to keep the money, and how to reach the number faster.
Key takeaways
- 20% down avoids PMI, but many loans allow 3–5% (FHA 3.5%, VA 0%).
- Budget closing costs too — typically another 2–5% of the price.
- Keep the money liquid and safe: a high-yield savings or money market account, not stocks.
- Automate transfers, redirect windfalls, and check state down-payment-assistance programs.
Saving for a down payment is the biggest hurdle between renting and owning — but it's a math problem with a clear plan, not a mystery. This guide covers how much you actually need, where to keep the money, and how to reach the number faster than you'd think.
How much do you actually need?
The classic target is 20% of the price, which avoids private mortgage insurance (PMI) and gets you the best rates. But it's not required: many conventional loans allow 3–5% down, FHA loans as little as 3.5%, and VA loans zero. Putting less down means a bigger loan and PMI, but it can get you in the door years sooner.
Don't forget closing costs
The down payment isn't the only cash you need. Closing costs — lender fees, title, appraisal, taxes — typically add 2–5% of the price on top. On a $350,000 home, that's another $7,000–$17,500. Budget for the down payment and closing costs together so the finish line is the real one.
Where to keep the money
Down-payment savings belong somewhere safe and liquid, not in the stock market — a market dip right before you buy could gut your fund. A high-yield savings account or money market account keeps it FDIC-insured and earning a real rate. For a purchase more than a couple years out, a CD ladder can lock in slightly higher rates.
How to hit the number faster
- Automate a fixed transfer every payday into a separate account you don't touch.
- Redirect windfalls — tax refunds, bonuses, gifts — straight to the fund.
- Cut one or two big recurring costs temporarily; housing itself is the biggest lever.
- Check first-time-buyer and down-payment-assistance programs in your state — many offer grants or low-cost second loans.
Weigh saving longer vs. buying sooner
A bigger down payment lowers your loan, payment, and interest — but saving another year while rents and prices rise has a cost too. There's no universal answer: run the numbers on buying now with less down (and PMI) versus waiting to hit 20%, and pick the path that fits your finances and your timeline.
Set your target and timeline
Use the down payment and savings calculators below to turn a home price into a concrete goal: how much you need for the down payment and closing costs, and how long steady monthly saving takes to get there. A real number and a date make the goal feel reachable — and keep you on pace.
Related calculators
Down Payment Calculator
See the cash you need upfront to buy a home — down payment plus closing costs — and how many months of saving it takes to get there.
Savings Goal Calculator
Two answers for any savings goal: the monthly deposit that hits your target on time, and when you'd get there at your current saving pace.
Home Affordability Calculator
How much house can you afford? Get a realistic max price from your income, debts, and down payment using the 28/36 rules lenders actually apply.
Frequently asked questions
How much do I need for a down payment?
A 20% down payment avoids private mortgage insurance and earns the best rates, but it isn't required — conventional loans go as low as 3–5%, FHA loans 3.5%, and VA loans 0% for eligible buyers. Remember to add closing costs of about 2–5% of the price on top of the down payment.
Where should I keep my down payment savings?
Somewhere safe and liquid — a high-yield savings or money market account that's FDIC-insured and earning a competitive rate. Avoid investing money you'll need within a few years in the stock market, where a downturn could shrink your fund right before you buy. A CD ladder works for a purchase a couple years out.
Should I wait to save 20% or buy sooner with less?
It depends. A bigger down payment lowers your loan, payment, interest, and removes PMI — but waiting while rents and home prices rise has a real cost too. Compare buying now with less down (and PMI) against saving longer for 20%, and choose based on your budget, the market, and your timeline.
Sources
Get money guides like this in your inbox
Practical, no-spam tips and the tools to act on them. Unsubscribe anytime.
Disclaimer: DayCents provides this calculator for educational purposes only. Results are estimates based on your inputs and the stated assumptions — they are not financial advice, a quote, or an offer of credit. Consult a qualified financial professional before making major money decisions.