Spending

The top 10 U.S. metro areas where homebuyers can save for a down payment fastest

"Small- to mid-sized metros in the Midwest are the best for first-time homebuyers."

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Median home sale prices have hit record highs, spurred by scarce inventory and bidding wars. And the higher the price, the bigger the down payment.

Depending on where you look, though, the challenge to save a 20% down payment could be easier. In fact, it can take just three years or less to be able to afford a starter home in certain Midwest metros. In Bloomington and Springfield, Illinois, you might be able to reach that goal by the end of 2023.

Using data from the U.S. Census Bureau, Economic Policy Institute, Bureau of Labor Statistics, and Zillow, RentCafé researchers analyzed 174 U.S. metros to calculate the number of years it would take a two-person family to save up the 20% down payment on a starter home.

Here are the 10 U.S. metros where renters can save fastest:

10. Des Moines, Iowa

Time to save for a down payment: 2 years, 7 months
Median starter home price: $154,720
Down payment value: $30,944

9. Madison, Wisconsin

Time to save for a down payment: 2 years, 6 months
Median starter home price: $242,538
Down payment value: $48,508

8. Fargo, North Dakota

Time to save for a down payment: 2 years, 5 months
Median starter home price: $187,766
Down payment value: $37,553

7. Bridgeport, Connecticut

Time to save for a down payment: 2 years, 5 months
Median starter home price: $303,031
Down payment value: $60,606

6. Bismarck, North Dakota

Time to save for a down payment: 2 years, 4 months
Median starter home price: $212,918
Down payment value: $42,584

5. Ann Arbor, Michigan

Time to save for a down payment: 2 years, 4 months
Median starter home price: $228,996
Down payment value: $45,799

4. Trenton, New Jersey

Time to save for a down payment: 1 year, 10 months
Median starter home price: $164,490
Down payment value: $32,898

3. Cedar Rapids, Iowa

Time to save for a down payment: 1 year, 9 months
Median starter home price: $117,181
Down payment value: $23,436

2. Springfield, Illinois

Time to save for a down payment: 1 year, 3 months
Median starter home price: $81,901
Down payment value: $16,380

1. Bloomington, Illinois

Time to save for a down payment: 1 year
Median starter home price: $105,249
Down payment value: $21,050

Residents are flocking to small and mid-sized cities

Over a third, 36%, of the metros RentCafé analyzed allow home seekers to save enough for a traditional down payment in less than 10 years. It would take three years or less to save in all of the top 20.

"Notably, small- to mid-sized metros in the Midwest are the best for first-time homebuyers," according to the data. Illinois offers seven metros where buyers can save fast.

Moving trends indicate that the Midwest's affordability isn't a surprise: Recent data from moving company United Van Lines' Annual National Movers Study, which tracked Americans' migration patterns in 2021, shows that of the top 10 states with influxes, six are among the 20 least densely populated in the U.S.

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And an August survey of 875 adults from Legal & General Group found that 37% want to move to a smaller town to cut down on costs

People aren't wrong about small-town savings potential. Look at the cost of housing in pricey San Francisco versus Bloomington, Illinois, the top place RentCafé's list: Median homes in the Bay Area are valued at over $1.5 million. In Bloomington, meanwhile, they're around $204,500.

Buying the wrong place 'can come with some consequences'

If you're moving in order to buy a home, don't act on impulse, experts say. Take your time to be sure you'll be happy there by renting or visiting first.

And focus on consistent saving.

"In today's environment, trying to time the market may seem enticing," says R.J. Weiss, a certified financial planner in Geneva, Illinois. "However, it's a very hard game to play and can come with some consequences, as [mortgage] rates move both ways. It's much more important to worry about the larger issues such as whether you're buying the right home in terms of price and fit."

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While it may be tempting to buy quickly, getting a better idea of a new city by renting before making a major investment can be smart, realtor Jake A. Leahy recently told Grow: "Even if you just find out which neighborhood you prefer, having 12 months or so of insight can be helpful."

You don't need to put down the full 20% down payment to qualify for a home, either. Some traditional lenders may be willing to let you put less money down if you pay for private mortgage insurance, which will add 0.5% to 1% to the cost of the mortgage each year.

Eligible buyers can tap into federally backed mortgage programs to help with some of the costs. Depending on the loan, you could pay a smaller amount or put nothing down at all.

"There are some great programs available including down payment assistance and grants to provide an affordable option for buyers getting into the market for the first time as well as those looking to simplify their lifestyle," says Denver-based broker Jenny Usaj. "Homebuyers looking for this option should connect with a reputable lender who specializes in these types of loans."

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