How to Save for a Down Payment on Your First Home

Saving for a down payment on a house can feel challenging when rent, groceries and everyday expenses already compete for your paycheck. The good news is that you don't necessarily need a 20% down payment to buy a home, and even small, consistent savings can help you reach your goal. Whether you're preparing to buy your first house or planning your next move, learning how to save for a down payment starts with setting a realistic target, reviewing your finances and creating a budget you can maintain. These three simple steps can help you turn a major financial goal into a manageable savings plan.

Key Takeaways:

• Set a down payment target using your home price, loan options and timeline.
• Review your spending to find savings without giving up everyday comforts.
• Build a monthly budget and automate deposits to grow your savings steadily.
• Save for closing costs and emergencies alongside your down payment goal.

What Is a Home Down Payment?

 A down payment is the portion of a home's purchase price you pay upfront, with a mortgage generally covering the remaining amount. Depending on the loan program and lender, qualified buyers may be able to purchase a home with as little as 3% down, while others may choose to put down 20% or more. A larger down payment can reduce how much you borrow and may help you avoid private mortgage insurance on a conventional loan. The right amount depends on your finances, loan options and homebuying goals.

How much should you put down on a house, though? The good news is that you can often choose how large of a down payment to make – but the decision is not always easy. Some people believe bigger is better, while others prefer to keep down payments as small as possible. Take some time to evaluate the pros and cons of each option and decide which is best for your situation.

How to Save for a Down Payment in 3 Steps

Saving money for your down payment may seem daunting, especially if you are aiming for close to 20%. Here are three steps to help get you started:

Step 1: Set a Home Down Payment Savings Goal

The first step in the process is to determine a timeline for when you anticipate becoming a homeowner, get an idea of housing prices and start saving accordingly. For example, if homes in the area you are interested in sell for about $300,000, and you would like to buy in five years, making a 20% downpayment ($60,000) would mean saving $1,000 a month. Before deciding on a savings target, explore Perry Homes financing resources and speak with a lender about the loan options available to you.

What to Include in Your Home Savings Goal

• Down payment: Calculate your target percentage based on the home's estimated purchase price and the financing options available to you.
• Closing costs: Set aside additional savings for lender fees, title services and other expenses associated with closing.
• Moving and emergency funds: Leave room for moving expenses, initial household needs and unexpected costs after purchasing your home.

If you're also planning for other expenses, our guide to saving for a house offers a broader look at homebuying costs and budgeting.

Step 2: Review Your Finances and Find Ways to Save

Once you have a goal in mind, review your current spending to determine what is a necessary expense and what is not. Where can you tighten your spending? What can you not afford to live without? Do not think of this as giving up what makes your life enjoyable. Instead, think of this as an opportunity to get creative. Try meal prepping instead of eating out or ordering in. Invite friends over for a game night instead of going out on Saturday night. Other ways you can save more money for a down payment include:

• Pay down high-interest debt. Put additional money towards paying off high-interest debt faster so that you can save for a down payment sooner. This also helps improve your credit score, which is one factor lenders look at when you apply for a mortgage loan.
• Skip a resort vacation. Instead of splurging on airfare and accommodations for your next vacation, enjoy some time off exploring popular destinations within driving distance of your home.
• Put aside extra income. Instead of using a work bonus to buy a new TV, put the money towards your down payment.
• Pick up a second job. Earnings from a second job could help you make substantial contributions to your down payment savings.
• Shop around. When was the last time you got a car insurance quote or negotiated a lower rate for your cable or phone bill? Little changes like this could make a significant impact overtime.

How to Prioritize Your Spending Changes

• Protect essential expenses: Keep housing, utilities, transportation and required debt payments covered before allocating additional savings.
• Focus on recurring expenses: Identify monthly costs you can realistically reduce so the savings continue throughout your homebuying timeline.
• Balance savings and debt: Consider how paying down high-interest debt affects your monthly cash flow alongside your down payment goal.

For additional guidance, explore our first-time homebuyer tips to help prepare for the steps beyond saving your down payment.

Step 3: Create a Monthly Budget and Track Your Progress

Once you have assessed your finances, it is time to start tracking your spending.  A budgeting app, spreadsheet or your bank's spending tracker can help you organize expenses, identify spending patterns and monitor your progress toward your down payment savings goal. You can also choose a budget guideline to follow, such as the 50/30/20 plan, where you allocate:

• 50% of your take-home pay to necessities, such as housing and car payments
• 30% to discretionary spending
• 20% to your financial priorities, like savings and debt

Do not forget to regularly look for opportunities to cut back on "fun” expenses (new clothes, extravagant nights out, new games, etc.) so that you can reallocate money to savings.

Simple Ways to Stay Consistent With Your Savings

• Automate contributions: Schedule recurring transfers into a dedicated down payment savings account after each payday.
• Track monthly progress: Compare your current balance against your savings target to see whether you're on schedule.
• Adjust when needed: Revisit your contributions when income, expenses, home prices or your planned purchase timeline changes.

Put Your Down Payment Savings Plan Into Action

Once you've established your savings plan, our Homebuying 101 guide can help you understand what comes next in the purchasing process.

Understanding how to save for a down payment is one of the first steps in the homeownership process. Are you ready to start your home buying journey? Explore and compare Perry Homes’ move-in ready properties to find your dream home today.