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Homeownership is a dream come true for many people.

In fact, approximately 66 percent of people surveyed by Wells Fargo in 2016 cited buying a home as an accomplishment, although many indicated that saving enough money for a down payment is one of the biggest obstacles to this goal.

Understanding how much to save for a down payment and following these simple steps can help make saving to buy a home less stressful.

Down payments 101

It’s easy to overestimate the amount you’ll need to save for a down payment, especially if you’ve only heard about the 20-percent down-payment rule.

Even so, paying 20 percent as a down payment has these benefits:

  • Having a better chance of obtaining mortgage approval.
  • Qualifying for lower interest rates.
  • Making smaller monthly mortgage payments.
  • Avoiding private mortgage insurance.
  • Instantly building home equity.

Although many experts consider the 20-percent down-payment rule to be the golden rule for saving for a house, it’s not the only option.

In fact, you may be able to buy your own home with a down payment as low as 3 percent, depending on the type of loan you get.

Tip: While you’re saving, don’t forget to put some money aside to cover your loan fees. Closing costs can total $2,300 to $4,000 on a $200,000 mortgage.

Saving tips to buy a house

Before you start saving money, decide how much you’ll need, based on the size and cost of the home you want to buy.

To learn how much house you can afford, use an online calculator to see how the mortgage payment would fit into your budget. Here are some tips on saving money:

  • Pay off debt — Attacking high-interest debt is a good place to start. Once you pay off credit cards and other high-interest debts, your budget will be freer for saving. As a secondary benefit, paying down debts helps give you a better credit rating.
  • Stash away extra money — Did you get a raise or a hefty tax refund? Instead of spending it or absorbing it into your budget, take that amount and put it into a savings account.
  • Get a roommate or rent your apartment — If you travel a lot, you could rent your apartment while you’re away to earn extra money. Alternatively, if you have a free room, bolster your income and savings by getting a roommate. Depending on the rental market in your area, you could earn an extra $500+ per month.
  • Start a side job — Get a second job on weekends or start a side business by freelancing, consulting or turning your hobbies into moneymaking opportunities. There are many different ways — tutoring, babysitting, waitressing — to earn extra cash, both in and out of the home.
  • Pay yourself first — Automate your savings by having a portion of every paycheck deposited directly into your savings account.
  • Cut out big expenses — Switching to generics instead of name brands can save a few bucks, but if you want to save in bigger chunks, you might need to make some sacrifices. Cut out cable TV, skip your annual vacation or continue driving your beater car.


Now that you have a few ideas to help start your savings, set a realistic time frame for your plan. If you have a longer-term goal, shoot for saving at least 10 percent of your income every year.

Learn more about today’s mortgage rates.

If you want to buy a home in the next 12 to 18 months, save at least 20 percent of your income. For example, if you earn $100,000 per year, you’ll save $20,000 after one year and about $30,000 after 18 months.