Saving for a Down Payment Might Take up to 7 Years or More

Blog posted On November 08, 2018

According to a new Zillow report, it will take an average American approximately seven years to save for a 20% down payment on an average-priced home.  This report assumes the worker earns the median income and saves 10% of their total earnings each month.  This seven-year saving period is the longest since early 2008. 

In comparison, in 1988, it took the average American approximately 5.5 years of saving 10% of their monthly income to accumulate a 20% down payment.  That figure is based on a median household income of $28,100 and a median home price of 79,400.  Despite today’s strong labor market and low unemployment rate, wage growth has stagnated, and home prices are on the rise.  Home buyers saving for a 20% down payment are facing a less and less achievable goal.  However, the 20% down payment is not required to purchase a home, even with a conventional mortgage.  Numerous low down payment mortgage options are available for first-time home buyers and repeat home buyers alike.


No Down Payment

The VA Loan is insured by the Department of Veterans Affairs and is available to qualifying active duty military, returning Veterans, or surviving spouses.  The VA Loan does not require a down payment and also has the option to finance closing costs into the mortgage loan, making it one of the most affordable home financing options available. 

The USDA Loan is insured by the United States Department of Agriculture and available in designated rural and suburban communities.  The USDA Loan does not require a down payment but has a 1% funding fee.  The home buyer has the option to finance both the 1% funding fee and the closing costs into the mortgage loan.  To check your eligibility visit


Low Down Payment  

The FHA Loan is a low down payment mortgage insured by the Federal Housing Administration.  It’s a popular option for first-time home buyers because of its more lenient credit standards, and down payment options as low as 3.5%.  FHA Loans require an upfront mortgage insurance premium and will carry mortgage insurance until the homeowner sells their home or refinances into another type of mortgage. 

The Fannie Mae HomeReady mortgage is available with down payments as low as 3%.  It was designed for home buyers with lower credit scores and less cash for the down payment.  Like the FHA Loan, HomeReady requires mortgage insurance, but unlike the FHA Loan, the home buyer can cancel the mortgage insurance once their home equity reaches 20%.

 The Freddie Mac Home Possible mortgage requires down payments as low as 3% and 5%.  Home buyers can get qualified even if they do not have a credit score.  Again, the Home Possible mortgage will require mortgage insurance, but the home buyer can cancel the mortgage insurance once their home equity reaches 20%. 



Home buyers with little to no down payment savings looking to grow their down payment, can do so through contributions from friends and family through HomeFundIt, the down payment crowdfunding platform.  HomeFundIt is a digital down payment platform that connects home buyers to down payment resources, allows them to build and share a campaign page dedicated to their down payment, and ensures all funds raised are stored safely and compliantly in escrow until the time of home purchase.  To learn more about this innovative down payment solution, visit


As saving for a 20% down payment becomes increasingly unreachable, mortgage lenders like me are committed to finding ways for all of our clients to reach their homeownership goals.  Buying a home is the foundation of the American dream, and the more ways to finance that dream, the more accessible it becomes. 


Sources: National Mortgage Professional Magazine, Zillow