How Long It Takes to Save for a 20% Down Payment on a Home Varies by City
Saving for a 20% down payment on a home can be a significant challenge, and it can take years to reach this goal. However, the timeline to achieve this varies widely depending on where you want to live.
According to a report by RealtyHop, a real estate investment agency, it can take 10.85 years to save for a 20% down payment in New York City, where the median list price is $865,000. In contrast, in the city of Detroit, it would take just 2.53 years to reach a 20% down payment on a home priced at $100,000, which is the median listing price in the area.
In other cities, the timeline to save for a 20% down payment ranges from 3.55 years in Cleveland, Ohio, to 14.10 years in Los Angeles, California. These cities are among the top 100 U.S. cities by population, and the report uses median list prices and household income data from the U.S. Census Bureau to estimate the timeline.
Even in cities where homes are less expensive, there can be roadblocks to saving for a down payment. A separate report by Zoocasa, a Canada-based real estate website and brokerage, found that homebuyers with children take longer to save for a 20% down payment due to expenses such as childcare costs. In Detroit, for example, it can take 20.3 years for a family with children to save for a 20% down payment from scratch, compared to 4.2 years for a family without children.
Experts caution that rising home prices can also make it more difficult to save for a down payment. “The more expensive real estate is where you want to live, the more you’ll probably want to save for a down payment,” said Jacob Channel, an economist at LendingTree.
Not all buyers need to put 20% down, however. Some mortgages, such as VA loans and USDA loans, offer 0% down payment options, and Federal Housing Administration loans require as little as 3.5% down. Additionally, some lenders offer lower down payment options for first-time buyers and low- and moderate-income buyers.
To come up with a down payment savings timeline, it’s important to have a good household budget, know the median listing price of homes in your desired area, and factor in closing costs, which can range from 2% to 6% of the loan amount. Experts advise setting realistic goals and taking the time needed to reach them. “Go as slow or as quickly as you need to,” said Channel. “Ensure that you’re making good choices.”