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    When buying a house, your down payment will likely be the biggest upfront cost. And saving for that is a roadblock for many aspiring homeowners. 

    Many buyers believe that the only way to afford a home is by paying a 20% down payment. But there are now more options to buy a home with zero to little down payment. This makes it easier to save for a down payment in a shorter amount of time.

    Through a combination of creativity and a solid savings plan, it’s possible to be a homeowner sooner than you think. 

    We’ve put together a detailed savings plan to help you save for a mortgage down payment.



    Smaller Down Payment Vs. Larger Down Payment


    A smaller down payment means a higher loan-to-value (LTV) ratio. Lenders see this as a risk and they usually compensate by charging higher interest rates. Paying less than 20% down payment means buying private mortgage insurance (PMI), adding 0.5% to 1% to your loan amount. You’re also at risk of going underwater in case of a drop in the housing market.

    A larger down payment, on the other hand, will give you access to lower interest rates which can save you money in the long run. You can also save on mortgage insurance premiums since you don’t have to pay for the PMI. Additionally, you’ll have a safety cushion to refinance or sell your home in the future for a good deal.

    While there are advantages to paying a larger down payment, it also has its drawbacks. 

    Saving up for a larger down payment may take time, which means entering the housing market at a later time. You’ll also have less cash to fix your new home. And, you’ll have a smaller emergency fund.

    Whether you decide to pay for a smaller or larger down payment is your personal decision. Take time to weigh the pros and cons, and go for the most practical choice according to your needs and budget.


    How to save for a mortgage down payment


    1. Determine how much you want to pay for your down payment

    Before you decide on an amount, it would help to explore your options on where to get financial assistance for a down payment. Learn your options below.

    • Check if you qualify for a Veterans Affairs (VA) or United States Department of Agriculture (USDA) loan

    These types of loans require as low as 3% down payment, and in some cases, 0%. But first, you need to check if you’re eligible. Click the links below to find out.

    1. VA Loan Eligibility Requirements
    2. USDA Loan Eligibility Requirements
    • See if your area offers First-time Homebuyers Program

    Some cities offer first-time buyer programs that will make it easier for new home buyers to buy a home by providing them interest-free loans. To check, go to your city hall and inquire about their housing programs. Or, you can visit First-Time Homebuyer Assistance Programs to see the available grants and loan programs in different cities and counties in the US.

    For a more detailed discussion on other down payment options and how you can qualify to buy a home, you can read this article.


    Down Payment Formula

    After checking if you qualify for any of those programs above, you can now gauge how much you want to save up for a mortgage down payment. To determine that amount, you can use this down payment formula: purchase price X percentage down = amount of DP to save.

    Let’s say the median home costs $300,000 in your area and you want to pay at least a 3% down payment. Multiply $300,000 by 0.03 and the product of $9,000 is the minimum amount you need to save. 

    If you aim for a 20% down payment, following the same formula above, you’d need to save at least $60,000.


    2. Set a timeframe to buy your house and create a monthly savings plan

    How long it’ll take you to save for a down payment is entirely up to you. But you have to set a timeline so you can create a concrete monthly savings plan. With this, you can set specific values and also measure your progress.

    For instance, you’ve decided to buy a home in the next 24 months and you need to come up with a 20% down payment. 

    You can use this formula to determine your monthly savings goal: down payment amount/number of months = monthly savings.

    Using the same example above, 20% of a $300,000 home will be $60,000. Divide that into 24 months and you’ll get $2,500 which is the amount you need to save on a monthly basis.

    If this amount is realistic, then stick with it. Otherwise, you can do any of these three things: adjust your timeline, lower your expenses, or increase your income.


    happy couple sitting in their new home



    3. Cut down on your expenses until you reach your savings goal

    Cutting down on  some expenses may seem daunting, but its reward will be worth it — becoming a homeowner. If you’re not sure how to do it, here are some ideas on how to lower your expenses while working on making your dream home a reality.

    • Celebrate at home on special occasions, instead of eating out: save around $200 per month
    • Wear used clothes and try to mix and match instead of buying new ones: save around $100 per month
    • Buy more affordable brands at the grocery store: save around $160 per month
    • Take a break from cable temporarily: save around $100 per month
    • Cancel your online subscriptions temporarily: save around $50

    If you add up all these, you can save up to $1,610 per month. That’s $38,640 off your down payment goal of $60,000 after two years of saving.


    4. Increase your income to ensure you hit your monthly goal

    The best way to reach your target monthly savings goal is to boost your income. You can achieve this by picking a side hustle. A side hustle can be anything from selling stuff, renting out your spare bedroom or parking space, or offering your services during your free time.

    According to, some of the top-paying side hustles are driving for Lyft or Uber, working as a coach or fitness trainer, freelancing and consulting, dropshipping or e-commerce, teaching or tutoring, selling online, babysitting or caretaking, etc.


    5. Automate your savings plan to ensure you stick to your plan

    Automating your savings will ensure that you don’t lapse on your monthly savings goal. But first, you have to open a separate savings account for this purpose.

    Then, ask your employer to deposit a percentage of your salary to this savings account. If your income comes from your side hustles, ask your bank to transfer funds automatically on a specified day of the month.

    Since saving money doesn’t come naturally to many, automating your savings will give you one less thing to worry about and will make it easier for you to hit your goal.




    When planning to save for a mortgage down payment, keep in mind that this amount will go towards your mortgage. That means the larger you save and pay, the lesser the loan amount, monthly payment, and insurance fees will be. Having this perspective will give you more inspiration to save and buy your dream home.

    Being financially prepared to buy your first home may take time, but as long as you stay on course, you’ll be a homeowner in no time.

    For more tips and guides on homeownership and renting, subscribe to our blog.


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