Saving for a Home: How Long Will It Take?
Saving for a 20% down payment on a home can vary depending on where you live. In cities like New York City, it could take around 10.85 years for the typical buyer to save $173,000, which is 20% of the median list price of $865,000 for a home, as reported by RealtyHop.
RealtyHop analyzed the “barrier to homeownership” in the top 100 U.S. cities based on median list prices and median household income data. They found that in the five cities with the lowest barriers to homeownership, the savings timeline is less than four years. Detroit ranked as the city with the lowest barrier to homeownership, where potential homebuyers only need 2.53 years to save for a 20% down payment on a $100,000 home.
While less expensive cities may seem more affordable, big expenses like childcare or rising home prices can still pose challenges. Even with cheaper homes, families with children may take longer to save for a down payment compared to those without children.
It’s important to note that a 20% down payment is not always required to buy a home. Some mortgage programs offer options with smaller down payments, such as VA loans, USDA loans, and FHA loans.
While a smaller down payment can help you become a homeowner faster, it may also result in higher monthly mortgage payments due to added costs like private mortgage insurance (PMI). It’s essential to consider your financial circumstances and create a realistic savings timeline based on your income and expenses before deciding on a down payment amount.
Ultimately, the key is to set achievable goals and make informed choices when it comes to buying a home. Take the time you need to save for a down payment and work towards your homeownership dreams at your own pace.