How to Save for a House Down Payment
The down payment is the biggest hurdle between renting and owning. With a clear target and a few smart moves, you can get there faster than you think — without gambling the money.
How much do you need?
The classic target is 20% of the home price, which avoids private mortgage insurance (PMI) and shrinks your loan. But many loan programs allow much less down, so 20% isn't a hard requirement — it's a goal that lowers your costs. Set a concrete number: pick a realistic price range, calculate your target percentage, and add an estimate for closing costs (commonly 2%–5%). That total is your savings goal.
Where to keep your down payment
This is money you'll need in the near future, so safety beats growth. Keep it in an FDIC-insured high-yield savings account where it earns interest but can't drop in value. Do not invest a short-term down payment in the stock market — a downturn right before you buy could wipe out part of your goal. If your timeline is several years out, a CD ladder can also work.
Save faster: six strategies
- Automate a dedicated transfer. Open a separate "House Fund" account and auto-deposit every payday so you never see the money.
- Bank every windfall. Tax refunds, bonuses, and gifts go straight to the fund.
- Cut your biggest costs temporarily. Housing, food, and transportation are where real money hides — a roommate or cheaper car can supercharge savings.
- Lower your bills. Negotiate or cancel where you can — see how to lower monthly bills.
- Add income. A temporary side hustle dedicated entirely to the fund accelerates everything.
- Pause low-priority goals. Within reason, you might redirect extra cash here while you're in saving mode (but keep your emergency fund and any 401(k) match).
Don't overlook assistance programs
Many first-time buyers qualify for down payment assistance, grants, or low-down-payment loan programs through state and local agencies. These can dramatically lower the cash you need up front. It's worth researching what's available in your area before assuming you must save a full 20%.
General educational information, not financial advice. See our disclaimer.