How Long Do I Need to Save for a Down Payment?
One of the biggest hurdles to buying a home is saving enough money for a down payment. As you begin to budget and prepare to buy your first home, you need to decide how much you want to put down and how long it will take you to save.
Saving for a Down Payment
As we talked about in a blog post last month, a 20-percent down payment is not required. However, there are pros and cons to both lower and higher down payments. Since the average first-time homebuyer puts 6 percent down, let’s look at some generalizations for both a 10-percent down payment and a 3-percent down payment.
Using data from every state, we can estimate how long it will take an individual with a median income, paying median rent, to save up for a down payment on a median-priced home.
10-Percent Down Payment
According to this data, the national average to save up for a 10-percent down payment is about 2.5 years. However, there is good news for us Iowans. The data shows we can actually save up the fastest out of all 50 states – in about 1.31 years.
3-Percent Down Payment
If you decide to take out a loan requiring a 3-percent down payment, you might not have to save up for very long at all. In fact, the data shows residents of Iowa have to save for less than half a year (.39 years to be precise) to buy a home.
Wherever you are in the budgeting and planning process, this data shows a new home might be within closer reach than you think. While each situation is completely different, budgeting and saving money each month can make you a homeowner in the not-so-distant future.