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How long does it take you to save money 20% down payment A house is only as good as where you live.
In expensive areas like New York City, it could take the average buyer about 10.85 years to save $173,000, which is 20 percent of a home’s median list price of $865,000, according to one survey. Report Provided by real estate investment agency RealtyHop.
RealtyHop measured the “barriers to homeownership” in the top 100 U.S. cities by population. The analysis is based on median prices using more than 1.5 million residential listings and median household income data from the U.S. Census Bureau. Suppose a family saves 20% of its gross annual income and intends to pay a 20% down payment.
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In each of the five cities with the lowest thresholds for homeownership, the savings horizon is less than four years.
The report found that Detroit has the lowest barriers to home ownership.
The report found that in Detroit, a potential homebuyer making about $39,575, the area’s median household income, would need just 2.53 years to put down a 20% down payment on a home. For a home selling for $100,000, that’s $20,000.
Cleveland, Ohio, comes in second: It would take a potential buyer there 3.55 years to save $27,800, or 20% of the area’s median listing price of $139,000.
Rounding out the top five are Baltimore; Buffalo, N.Y.; and Pittsburgh.
Even in cities with low cost of living, there can be barriers to saving
Even in less expensive cities, big expenses can derail your timeline for saving for a down payment.
a separate Report Canada-based real estate website and brokerage Zoocasa found that homebuyers with children take longer on average to put down a 20% down payment compared to those without children due to expenses such as childcare costs.
For example, it would take a potential homebuyer with children in Detroit approximately 20.3 years to save for a 20% down payment from scratch, according to Zoocasa. Meanwhile, the report found that if homebuyers in the area without children started buying a home without saving up front, it would take them about 4.2 years to come up with a 20% down payment.
LendingTree economist Jacob Channel said rising home prices could be another challenge.
“The more expensive real estate is where you want to live, the more likely you’ll want to save more money for a down payment,” Channer said.
For example, RealtyHop found that the median price of a home in Los Angeles is about $1.13 million. Los Angeles topped the list of the five cities with the highest barriers to homeownership, followed by Irvine, Calif.; Miami; New York City; and Anaheim, Calif.
Even the cheapest real estate on the “high bar” list – No. 3 Miami – is $699,000, nearly three times the price of Pittsburgh, the most expensive city on the “low bar” list.
The report found that if the typical Los Angeles household planned to put down a 20 percent down payment, they would need to save $1,339 per month over approximately 14.10 years.
Why you may not need 20% down
In many cases, you don’t need to put 20% down on a home.
In the third quarter of 2024, the average down payment will be 14.5% and the median will be $30,300. according to Realtor.com data. This is down from 14.9% and $32,700 in the second quarter of 2024, the site found.
Some mortgages require much less down payment. For example, the Department of Veterans Affairs offers a Veterans Administration loan program; it can be as low as 0% for those who qualify. Mortgages offered by the United States Department of Agriculture, or USDA loans, are designed to help buyers purchase homes in rural areas and offer a 0% down payment option.
Federal Housing Administration loans (FHA loans) can require down payments as low as 3.5% for qualified borrowers, including first-time, low- and moderate-income homebuyers, and minority homebuyers.
Experts say the benefit of having a smaller down payment is that you can become a homeowner sooner and save less.
But if you decide to buy a home with a smaller down payment, you may end up with Higher monthly mortgage payments.
“If you spend less money for a down payment, you’ll end up with a larger loan,” Channel said.
Additionally, when buyers put less than 20% down, private mortgage insurance is often added to the monthly cost, he said.
PMI costs can range from 0.5% to 1.5% of the loan amount each year, depending on factors such as your credit score and total down payment. according to to mortgage reports. For example, the site found that for a $300,000 loan, mortgage insurance premiums could range from $1,500 to $4,500 per year, or $125 to $375 per month.
“This is another payment option that may be bundled with your mortgage, which can further increase your housing costs,” Channel said.
How to create your own savings schedule
Where you want to live long-term and your financial situation can help you determine your down payment savings timeline, says Melissa Cohn, regional vice president at William Raveis Mortgage.
First, Cohen says, you need to have a good household budget — know how much money you make, how much you typically spend and how much you can save in a given month.
“Can you spend less? Can you save more? … Can you save a bonus every year?” she said.
Then, find out how much a house in your desired location typically costs. “It’s important for buyers to go out and understand what price point is right for them,” Cohen said.
You also have to save on checkout costs, which can vary widely from place to place, Cohen said.
Average closing costs are approximately 2% to 6% of the loan amount, according to to NerdWallet. Therefore, a $300,000 mortgage may require $6,000 to $18,000 in closing costs in addition to the down payment.
To find out what closing costs typically are in the area you want, ask a mortgage broker or real estate agent, she said.
Overall, you want to set realistic goals for yourself and take the time to achieve them.
“Go as slow or as fast as you need,” says LendingTree’s Channel. “Make sure you make the right choice.”
