How Much to Save for a Down Payment on a House: A Step-by-Step Guide

Fact-checked by the The Credit Scout editorial team

You don’t need 20% down to buy a house. The median first-time buyer put down just 10% in 2025, according to the National Association of Realtors. That’s the real number, not the myth that keeps people renting longer than they have to. Knowing how much to save for a down payment on a house starts with ditching the idea that 20% is a requirement. It isn’t.

The NAR’s buyer and seller profile data shows the median down payment for all buyers hit 19%, but that figure is inflated by repeat buyers putting down 23%. First-timers? 10%. The gap has been widening, and in Q1 2026, the median down payment actually fell to $23,400, down over $5,000 from the prior year. Even more striking: 26% of first-time buyers fund part of their purchase from retirement or investment accounts, and 22% get family gifts or loans. Savings alone doesn’t buy most starter homes anymore.

This article lays out exactly what you need, where the money goes, and how to hit your number without draining your retirement or starving your emergency fund. You’ll walk away with a concrete target, a realistic timeline, and a few grant programs most people miss.

What a Down Payment Is and Why It Matters

A down payment is the cash you bring to the table at closing. The rest, usually 80–97%, comes from a mortgage lender. It’s the first chunk of equity you own in the home. Lenders treat it as a risk buffer: the more skin you have in the game, the less likely you are to walk away.

But it matters for three other reasons you’ll feel every month. First, a larger down payment shrinks the loan amount, which directly cuts your principal and interest payment. Second, it can reduce your interest rate, since lenders price risk into the rate. Third, putting down less than 20% on a conventional loan triggers private mortgage insurance (PMI), an extra monthly cost that protects the lender, not you.

Here’s what that looks like with real numbers. On a $350,000 home at 6.5% interest, 5% down ($17,500) means a $332,500 loan with a monthly principal and interest of $2,102. Put 20% down ($70,000), and the loan drops to $280,000, a monthly payment of $1,770. That’s $332 less each month, and zero PMI. Over 30 years, the difference in interest alone is north of $60,000.

The down payment isn’t just a gatekeeper. It’s a lever that controls your cash flow for decades.

Minimum Down Payment Requirements by Loan Type

Every loan program sets its own floor. The lower your credit score, the higher that floor usually rises. As of mid-2026, these are the hard numbers lenders actually use.

Conventional Loans

Fannie Mae’s HomeReady program permits a 3% down payment for qualified low-income borrowers, with no minimum personal contribution required. Standard conventional loans also start at 3%, but you’ll need a credit score of at least 620, and preferably 660 or higher to get pricing that isn’t punitive.

FHA Loans

The FHA minimum down payment is 3.5% for borrowers with a credit score of 580 or above. Score between 500 and 579? The minimum jumps to 10%. FHA also tacks on upfront and annual mortgage insurance premiums that stick around for the life of the loan if you put down less than 10%.

VA and USDA Loans

VA loans, backed by the Department of Veterans Affairs, require zero down payment as long as the sales price doesn’t exceed the home’s appraised value. USDA loans, meant for rural areas, offer the same 0% option with income limits. Both carry a funding fee or guarantee fee that can be rolled into the loan, but no PMI.

Jumbo Loans

Jumbo loans exceed conforming loan limits (currently $766,550 in most counties). Minimums range from 10% to 20% depending on the lender, property type, and your financial profile. If you’re in a high-cost market like San Francisco or New York, jumbo territory is unavoidable for even a modest home.

What First-Time Buyers Actually Put Down in 2026

The gap between the myth and the median is wider than you think. The National Association of Realtors reports that in 2025, the median down payment for first-time buyers was 10%. For repeat buyers, it was 23%. That 10% figure is the highest for first-timers since 1989, pushed up by cash buyers, not by loan minimums.

But here’s the nuance. In Q1 2026, Realtor.com data showed the actual dollar median fell to $23,400, that’s 12.8% of the median-priced home, but a drop of over $5,000 from the prior year. Why? Because the median home price eased, and more buyers used low-down-payment programs. The share of all-cash purchases hit 26% in some reports, which skews the overall averages upward and makes it look like everyone is putting down a fortune. They aren’t.

Also worth noting: 26% of recent first-time buyers tapped retirement or investment accounts, 401(k)s, IRAs, stocks, even crypto. 22% got family gifts or loans. The purely-saved-it-all approach is not the only road to ownership, and pretending it is just leaves people on the sidelines.

The Hidden Cash You Need Beyond the Down Payment

You can hit your down payment number and still be short at closing. The reason? Closing costs, prepaid items, and mandatory cash reserves. Most “how much to save” calculators ignore these. Don’t.

Closing costs run 2% to 5% of the purchase price. Nationally, the median is around $4,528, but in high-tax states or on jumbo loans, it can easily hit $8,000 or more. These cover lender fees, title insurance, appraisal, escrow setup, and transfer taxes. You can sometimes negotiate a seller credit, but in a competitive market, sellers aren’t eager to give it. The Consumer Financial Protection Bureau’s homebuying guide recommends accounting for these costs before you start shopping.

Beyond closing, you’ll also need prepaid items: property taxes, homeowners insurance, and possibly mortgage interest from the closing date through the end of the month. These can tack on another 1% to 2%. And many conventional lenders now want to see cash reserves after closing, typically two to six months of mortgage payments sitting in your bank account, untouched.

So a $350,000 purchase with a 5% down payment ($17,500) can easily require $25,000 to $30,000 in total cash to close, once closing costs, prepaids, and reserves are factored in. That’s the real number you should save toward.

How to Set Your Personal Savings Target

Start with the home price you can afford, not the one you want. A rule lenders apply: your total monthly debt payments (mortgage + credit cards + car loans + student loans) shouldn’t exceed 43% of your gross income. Back into a purchase price from there, then apply the down payment percentage that matches your loan type and credit profile.

If your target home costs $300,000 and you’re using a conventional loan with 3% down, your base down payment is $9,000. Add 4% for closing and prepaids ($12,000), plus a two-month reserve of your estimated mortgage payment (maybe $3,600). Total target: roughly $24,600. That’s your real savings goal, not just the $9,000.

Smarter Ways to Build Your Fund Faster

High-Yield Savings and Dedicated Accounts

Your down payment money needs to be safe and accessible. A high-yield savings account (HYSA) earning 4% or more turns a $20,000 balance into $800 of free interest per year. That’s real progress. Some states offer first-time homebuyer savings accounts with tax deductions on contributions and tax-free growth, check if yours is one of them.

Side Income, Not Sacrifice

Cutting your latte budget won’t get you $24,000 in two years. Instead, drive a rideshare on weekends, pick up freelance work, or sell unused items. Putting just $500 per month into your HYSA from a side hustle adds $12,000 in two years, half of your down payment on a $300,000 home. That’s faster than scrimping on groceries.

Gift Funds and Retirement Loans

Most loan programs allow gift funds from family, with proper documentation. If a parent or grandparent can help, use it. Alternatively, many 401(k) plans allow loans for home purchases up to $50,000 without the usual early-withdrawal penalty. Pay yourself back over time. It’s not ideal, but it’s an option 26% of first-timers already use.

3% Down vs. 20% Down: The Trade-off

Putting 20% down eliminates PMI and lowers your monthly payment. It also signals you’re a lower-risk borrower, so you’ll often get a slightly better rate. But waiting to save 20% while prices and rates move can cost you more than PMI ever will.

On a $350,000 home, 20% down is $70,000. If it takes you three extra years to save that amount, and home prices rise 3% annually, that same house now costs $382,000. You’ll pay an additional $32,000 for the property, plus possibly higher rates. Meanwhile, PMI on a 5% down loan might total $15,000 over the years until you hit 20% equity. The math doesn’t always favor waiting.

The right answer depends on your market, your credit, and how stable your income is. In a moderate-cost area with flat prices? Saving 20% might be smart. In a market where prices climb faster than you can save? Buy sooner with less.

Based on a $350,000 home, 30-year fixed at 6.5%, PMI estimates for conventional loan

The monthly difference between 3% and 20% down is about $376. That’s real money, but so is the $59,500 you’d need to save to reach 20%. The right call is the one you can afford without wrecking your finances.

Down Payment Assistance Programs You Shouldn’t Overlook

Most first-time buyers miss free money sitting in state and local programs because they don’t know it exists. Down payment assistance (DPA) programs provide grants, low-interest loans, or forgivable second mortgages to cover all or part of your down payment and closing costs.

The average DPA grant amount runs $5,000 to $15,000 depending on the state. Some are tied to specific areas, like revitalization zones, while others are income-based. You can stack DPA funds with gift money and even a seller concession in some cases. The CFPB recommends checking with your state’s housing finance agency, which typically administers these programs.

Eligibility rules vary: many require a first-time homebuyer education course and an income cap of 80% to 120% of area median income. But if you qualify, it can turn a 5% down payment requirement into a 1% out-of-pocket hit. Combine that with a 3% conventional loan, and you might close with less than $10,000 total cash on a $300,000 home.

Your Action Plan

1. Run your loan numbers first

   Get pre-approved by at least two lenders to see your actual borrowing capacity and the down payment each loan type requires. Don’t guess, use real credit and income data. A pre-approval also strengthens your offer when you’re ready.

2. Set your total cash-to-close target

   Take your target home price (based on what you can borrow) and multiply by the down payment percentage. Add 4% for closing costs and prepaids, plus three months of projected mortgage payments as a reserve cushion. That’s the savings finish line.

3. Open a dedicated high-yield savings account and automate

   Open a separate HYSA for the house fund. Set up an automatic transfer from your checking account the day after payday, $300, $500, whatever you can sustain. You’ll save faster when the money isn’t sitting in your checking account tempting you.

4. Add one income stream for the next 6–12 months

   A side hustle that brings in $400–$500 a month can add $5,000–$6,000 to your fund in a year. Driving, freelancing, tutoring, pick one and commit to it for a defined period. That’s your down payment accelerator.

5. Research and apply for DPA programs

   Visit your state housing finance agency’s web site and search for “down payment assistance.” Attend the required homebuyer education class early, it’s often free online. Getting approved for a grant can slash what you need to save by half or more.

Frequently Asked Questions

Can I buy a house with no down payment at all?

Yes, if you qualify for a VA loan or a USDA loan. Both programs offer 0% down for eligible military service members, veterans, and buyers in designated rural areas. No other federal program currently offers zero down for standard buyer profiles.

Is PMI required if I put less than 20% down?

On conventional loans, yes, you’ll pay PMI until you reach 20% equity based on the original purchase price or appraised value, depending on the servicer. FHA loans charge both an upfront and annual mortgage insurance premium regardless of down payment, though it drops after 11 years if you put down at least 10%.

How does my credit score affect the down payment I need?

Your score directly impacts the minimum down payment on some programs. FHA requires 3.5% with a 580 score but jumps to 10% below that. Conventional lenders might require higher down payments or charge sharply higher rates if your score is under 660. A higher score opens lower minimums and better pricing.

What’s the average down payment for a first-time buyer in 2026?

The median was 10% in 2025, according to the National Association of Realtors. In dollar terms, the Q1 2026 median was $23,400. The average is skewed higher by cash buyers, so the median is more representative for people financing a home.

Do I have to use my own savings for the down payment?

No. Gift funds from family are widely accepted with proper documentation. Some first-time buyers also use loans from their 401(k) or withdraw from a Roth IRA penalty-free for a first home. Just be prepared to show a paper trail, lenders scrutinize any money that isn’t seasoned in your account.

How much should I save total, including closing costs?

A safe range is the down payment plus 4% to 6% of the home’s price for closing costs, prepaids, and a small reserve. On a $300,000 home with 5% down, that’s roughly $27,000 to $33,000 in total cash needed. The exact figure depends on local tax rates and the lender’s fee structure.

Should I wait until I have 20% down?

Not always. If home prices in your market are rising faster than you can save the extra 17%, buying sooner with less down and paying PMI can still build wealth. Run the break-even math: compare PMI costs versus how much more you’d pay for the same house later. In many places, waiting costs more.

Is it better to save for a down payment or pay off high-interest debt first?

Pay down credit card debt above 10% APR before aggressively saving. That debt erodes your financial flexibility and can raise your debt-to-income ratio, hurting your mortgage approval chances. A practical approach: clear high-rate debt, then redirect those payments into the house fund.