How to Save for a Home Down Payment

Build a realistic down payment fund with a timeline, savings rate, and account strategy that fits your income and target price.

  1. Calculate your target down payment. Decide what percentage of the home price you want to put down. Lenders typically require 3–20% depending on loan type; many first-time buyers aim for 10–20%. Example: a $400,000 home with a 15% down payment = $60,000. Check local median home prices to anchor your target number to a realistic home in your area, not a fantasy.
  2. Add closing costs and contingency to your target. Down payment is only part of the cash you'll need. Closing costs (title insurance, appraisal, legal fees, inspections) typically run 2–5% of the purchase price. Set aside an extra 5–10% as a buffer for inspections, repairs, or rate-lock timing. For a $400,000 home, expect to need $60,000–$76,000 total.
  3. Work backwards to find your monthly savings rate. Divide your target by the number of months you have. If you need $70,000 in 5 years (60 months), that's $1,167/month. If that number makes you wince, either extend your timeline or lower your target home price. Be honest: a saving plan that requires you to cut groceries to nothing will fail.
  4. Automate transfers into a dedicated high-yield savings account. Open a separate savings account (not your checking account) and set up an automatic monthly transfer the day after payday. As of 2026, high-yield savings accounts typically pay 3.5–4.5% APY — that's free money versus a regular savings account. The separation removes temptation; the automation removes willpower.
  5. Protect the money from lifestyle creep and unexpected bills. Build a separate emergency fund (3–6 months of expenses) *before* or *alongside* your down payment fund. If you raid the down payment fund every time your car breaks down, you'll never reach your goal. Emergency fund and down payment are different buckets — treat them that way.
  6. Revisit the plan annually and adjust if needed. Once a year, check: Are home prices in your target area rising faster than your savings? Has your income increased? Can you shorten the timeline or increase your target? Life changes — a raise, a partner, a job move. The plan is a document, not a contract. Update it.