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# How much money you’d need to save per paycheck to afford a typical down payment for a home

## Saving \$300 per paycheck can help you afford a mortgage in a year.

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Buying a home is a lifelong dream for many Americans and can be an important step in building wealth for the future. For a lot of younger people, it can also seem forever out of reach. It may come as a surprise to know, though, that you can get a new place with much less than the traditional 20% down payment.

"The idea they'll need 20% keeps a lot of people from taking the plunge," Andy Taylor, who runs the mortgage team at Credit Karma, told Grow last year. Many banks and financial institutions allow consumers to pay a smaller amount upfront. The median down payment is only 7.6%.

Lenders often ask for a minimum between 5% to 15% to obtain a mortgage, according to Bankrate, and certain types of federally backed mortgages require as little as 3.5%.

In select instances, you can even get away with putting nothing down.

While it makes sense to run your own figures based on home prices where you're looking and on the kinds of mortgages you qualify for, this breakdown of how much you'd need to save per paycheck to afford the typical down payment in a year can serve as a guide. Assume you're buying a home for the national median price of \$259,906, according to Zillow. If you are paid biweekly, you can likely expect 26 paychecks in a calendar year.

• For a 3% down payment (\$7,797) after 1 year: \$300 per paycheck
• For a 7.6% down payment (\$19,753) after 1 year: \$760 per paycheck
• For a 20% down payment (\$51,981) after 1 year: \$1,999 per paycheck

So if you save \$300 per paycheck, you could have enough for the down payment on a home in just a year.

## Homebuying costs to consider beyond the down payment

Putting 20% down is considered the gold standard since lenders use that money to mitigate risk in case the borrower defaults. The more money you put down, the less the lender stands to lose.

That's a reason why people who pay less than 20% upfront usually have to buy private mortgage insurance, as well, which can add 0.5% to 1% of the mortgage each year.

There are also other costs to consider aside from the down payment. Last year, closing fees averaged \$5,749 for a single-family home, according to ClosingCorp. That's more than twice what the typical American age 34 and younger had in savings.

"Just because you can afford the monthly mortgage does not mean you can afford the house," Thomas E. Murphy, head of Murphy & Sylvest Wealth Management, told Grow in September. "You need to allow for property tax, insurance, maintenance, and upkeep."

## Programs offer down-payment assistance

The good news is you may not have to go it alone.

Many states offer down-payment assistance programs for those who need a boost. In New Jersey, for example, first-time buyers can qualify for a loan of up to \$10,000 to cover the down payment and other closing costs. Meanwhile, in Colorado, residents can be eligible for grants worth up to 3% of the mortgage that they don't have to pay back.

Your job could even help: Some employers, 2%, offer down-payment aid and 3% offer mortgage assistance, according to a 2018 report from the Society for Human Resource Management.

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Don't drain your retirement savings or emergency fund to buy a home quicker, as that will likely put you in a bind later on if you fall into financial hardship or need expensive repairs.

However much you can afford for a home, consistent saving and careful budgeting can help you get there. The national median home value has jumped 5.1% in the past year and could climb another 4.8% within the next year, per Zillow, so don't feel bad if you need some time.

"Whatever you think you can afford on a new home purchase, give it a test drive," Mark La Spisa, a certified financial planner and president of Vermillion Financial Advisors, tells Grow. "Start saving the extra amount that is the difference between what you are spending now versus what you will spend after the new home purchase. Put this difference from projected expenses toward saving and trying out the new expense spending plan before it is too late."

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