May 2024

5 steps to reach your down payment goal

Saving for a down payment on a home may seem like a huge challenge, but it doesn’t have to be. The good news is, you may not need as much as you think. While it used to be common for homebuyers to aim for 20% or more of the purchase price as a down payment, today, that's no longer true.

Median down payments on a home

According to the National Association of Realtors, the median down payment overall was 15%, and just 8% for first-time buyers.Footnote1 And that's just the median — many homebuyers choose a mortgage that allows them to put down as little as 3%.

What that means in dollars will depend on the price of the home. For instance, if you aim for 20%, you'd put down $60,000 for a $300,000 home. With 3% down, you'd put down just $9,000 for a $300,000 home.

Tips to help you set your savings goal and reach it:

1. Consider your down payment strategy.

Assuming you already have a price range for a home, now you should decide how much you're able to put down for a down payment. Consider the pros and cons based on your situation:

Make a higher down payment:

  • Benefits: You'll reduce your total loan amount, so monthly payments will be smaller. If you put at least 20% down, you'll also avoid paying private mortgage insurance (PMI). Plus, you may be able to get a better interest rate.
  • The downside: It may take you longer to save up for a large down payment, so you'll have to wait to buy a home.

Make a lower down payment:

  • Benefits: With less money needed up front, you may be able to buy a home sooner. If you can afford to pay monthly mortgage payments, but you don't have a lot of savings, this could work for you.

  • The downside: You'll have a larger loan, which means larger monthly mortgage payments. Also, you'll probably need to pay mortgage insurance.

2. See if you're eligible for down payment help.

There are many programs designed to help first-time homebuyers. For instance, Bank of America’s Down Payment Grant program offers qualified borrowers up to $10,000 for a down payment or 3% of the purchase price, whichever is less.Footnote2 Visit the Bank of America Down Payment Center on my website to learn more about this and other programs in your area.

3. Explore using gift funds.

You can ask family members if they're able to contribute to your down payment. There are rules around doing this, so you'll need to work with your lender to be sure the gift will qualify. At the very least, you'll need a signed statement that the money is indeed a gift and is not a loan that needs to be repaid.Footnote3

4. Be sure to save for other home buying costs.

You'll also need additional funds for closing costs and the expenses for moving to your new home. Plus, new homeowners should plan a cushion of savings for regular maintenance as well as unexpected problems.

5. Don't wait to start saving.

Even if you can’t afford a lot, start saving something out of every paycheck right now. These tips can help you maximize what you save:

  • Automate your savings. Use direct deposit to send part of each paycheck into your savings account.
  • Trim your expenses. Try cutting back on nonessentials, like dining out, expensive vacations or cut cable subscriptions.
  • Put aside unexpected income. Tax refunds, bonuses or other unexpected funds can go straight into down payment savings.
  • Earn extra cash. If you can, find ways to boost your income: get part-time work at a local business; drive for a service such as Uber, Amazon Flex or Instacart; or, if you have the skill, sell homemade items online.
  • Be creative. Get more room in your budget for saving by sharing expenses with a roommate, shopping at a healthy food co-op, buying a used car or appliances instead of new ones, making your own gifts and household products, or trading your handyman skills for your neighbor's expert housecleaning.

Start your home buying journey today.

It may take a while, but the sooner you start, the sooner you'll be opening the door to your very own home.

A note from your lending specialist

Even if you’re not quite ready to buy a home, I’d be happy to talk to you about different mortgage programs and homebuyer assistance that can help you get your plans moving.

1 How to save for a down payment, Allison Martin, Bankrate, February 8, 2024. Accessed February 2024.

2 Qualified borrowers must meet eligibility requirements such as being owner-occupants and purchasing a home within a certain geographical area. Maximum income and loan amount limits apply. Minimum combined loan-to-value must be greater than or equal to 80%. Program funds can be applied toward down payment only. Borrowers cannot receive program funds as cash back in excess of earnest money deposits. Down Payment Grant program may be considered taxable income, a 1099-MISC will be issued, consult with your tax advisor. May be combined with other offers. The home loan must fund with Bank of America. Down Payment

Grant may only be applied once to an eligible mortgage/property, regardless of number of applicants. Homebuyer education is required. Bank of America may change or discontinue the Bank of America Down Payment Grant Program or any portion of it without notice. Not available with all loan products, please ask for details.

3 The Do’s and Don’ts of Down Payment Gifts, Holly Welles, My Mortgage Insider, January 5, 2024. Accessed February 2024.

04/2024 | MAP6489435