How to Save for a House Q&A and Expert Advice

BY The Lenders Network

5 minute read

If you’re interested in getting a mortgage, the first question you probably ask yourself is..

Can I afford it?

The number one hurdle first time home buyers and millennials face is the down payment.

While having 20% to put down is a huge plus and will make your payments much cheaper, not everyone has this much sitting in a bank account.

So how can you save for a down payment on a home?

In this article we will give you some ideas on how you can save for a house, mortgage programs that require small down payments, and how you can use gift money for a down payment. There are also down payment assistance and first time home buyer programs that can help you as well.

Speak to lenders to find out which type of mortgage is best for you

How much of a down payment do you need on a house?

how to save for a house down payment

The down payment amount you need will depend on the type of loan you get and your credit score. FHA loans for example require a 3.5% down payment. While other loans such as USDA and VA offer 100% financing.

The loan amount you need plays a role in determining which  mortgage type you’ll need. FHA loans have loan limits, $271,050 is most low-cost areas. So if you’re buying a house that exceed the FHA limit you’ll need a conventional or jumbo loan. These loans require higher down payments between 5% – 20%.

Down Payment Requirements by Mortgage Type

  • FHA Loan – 3.5% down payment if credit score is 580+ (10% down if credit score is between 500-579)
  • VA Loan – No down payment
  • USDA Loan – No down payment
  • FHA 203k Loan – 5% down payment
  • Conventional Loan – 5% – 20% down payment
  • Conventional 97 Loan – 3% down payment
  • Jumbo Loan – 15% – 30% down payment

1. What should a first-time buyer consider when deciding how much money to put down on a house?

A first-time home buyer should check their savings, retirement and investment accounts to see how much they can afford for a down payment. You don’t want to put down more than you have to unless it equates to a significant savings.

2. How does your credit score affect how much you need to put down?

saving up for a mortgage down payment

Credit scores are the biggest factor in the amount needed for a down payment. The lower your credit score, the higher your down payment will have to be. For instance a borrower with a credit score between 500-579 will need 10% down to obtain an FHA loan. Borrowers with a 580 or higher credit score can be approved with just 3.5% down. It is very important to make sure your credit scores are as high as possible. Read our article on how to increase your credit scores in 30 days.

3. What are the pros and cons to consider when putting less than 20% down?


  • More money in savings in case you need it
  • Abile to diversify investments instead of most of your money tied up in a house
  • In the event you have to foreclose, you will not lose as much money


  • Higher monthly mortgage payments
  • paying more interest over the life of the loan
  • You will be required to pay mortgage insurance which is roughly an average of $2000 annually
  • Higher interest rates. Rates are slightly higher for loans with less than 20% down
  • Closing costs and lender fees will be higher

4. What are the advantages of putting 20% down on a home loan?


  • You don’t need PMI with conventional loans. With a 80% LTV conventional loans don’t require PMI
  • Instant home equity
  • Lower monthly mortgage payments
  • Low interest rates
  • Increase chances of qualifying
  • Better loan terms


  • Less money in savings
  • More money tied up in the home
  • Huge loss in the event of default

5. What options should a buyer who can’t put down 20% consider? For example, are down payment assistance programs something buyers should be looking into?

There are many options for first time home buyers who don’t have a 20% down payment. For one, FHA loans are popular among first time homebuyers because they require just 3.5% down and a credit score of 580.

There are also first time home buyer grants and down payment assistance programs available. Borrowers should also check their local county website to find out if their are any programs.

VA loans – This is a loan for Veterans, there are many benefits of VA loans. Including, no downpayment and no mortgage insurance which equals big savings.

USDA loans: An excellent loan for home buyers in rural areas is a USDA mortgage. USDA loans offer 100% financing so you need no down payment.

Conventional loans: There are many lenders that offer 5% – 10% down payment for conventional loans. There is a 3% down conventional 97 program available.

6. How much should buyers be allocating for the additional costs of buying, i.e. escrow for taxes, insurance, closing costs, etc.?

PMI fees are usually 0.85% of the total loan amount. Property taxes vary across each state in the U.S. you should look up the property tax percentage in your county or state.

As an example Texas has 2.5% property taxes, a $200,000 home will pay $5000 annually in property taxes and 0.85% for MIP which is $1700 which comes to $6700 per year.

Closing costs are between 2-5% of the loan amount. Many factors come into play such as credit scores, down payment and the price of the house.

7. What are some effective ways buyers can come up with the down payment funds they need?

saving for a down payment on a house

Borrowers are able to use their retirement and investment accounts to fund the down payment.

Most of the mortgages mentioned here allow for the down payment to be a gift from a friend or family member.  also allows for the down payment to be a gift from a relative, company or friend.

There are also piggyback mortgage loans available. Like a 80-10-10 piggyback loan where you pay 10% down and get a loan for the other 10%.

Check out the various grants and down payment assistance programs on the HUD website, or your local city website.

8. How to save for a house down payment fast?

To save money for a down payment on a mortgage, obviously you need to limit your spending. If you can increase your income with a second job, or a side hustle you can really put some money away. Saving for a mortgage is something most homeowners had to do at some point. Here are a few things you can do to save up for the down payment.

  • Sell stuff you don’t need on Craigslist
  • Get a second or third job
  • Stop eating out
  • Be frugal with your spending
  • Make a budget
  • Sell your car and get a cheaper one
  • Get a roommate

9. What do first-time buyers need to know about down payment gifts?

Many mortgages mentioned in this article allow the down payment to be gifted from a relative, company, or friend. The person gifting the downpayment needs to show bank statements proving the money gifted came from their own savings and was not lended to them. You can read more about the down payment gift rules and guidelines.

Speak to lenders to find out which type of mortgage is best for you