With rising mortgage rates, runaway inflation, and high home prices, homeownership feels increasingly out of reach for many potential buyers.
In fact, one in three millennials who don't currently own a home fear they'll never be able to afford one.
The most often cited barrier to buying a home? Saving for a down payment.
The prevailing belief among first-time buyers is that you need a down payment of 20% to buy a house.
It's true that there are certain benefits to putting down 20% upfront — you can avoid paying for private mortgage insurance, for one. But most home buyers put down less.
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According to a recent report from the National Association of Realtors (NAR), the average down payment on a house in 2021 was 13%. Among first-time home buyers, the average was 7%, compared with 17% for repeat buyers.
For a home priced at $325,000, the median list price for a starter home, a 7% down payment would translate to $22,750, plus another 2 to 5% in closing costs, putting the total upfront costs at just under $35,000.
Total upfront costs to buy a median-priced ($325,000) starter home today
Total (incl. 3.5% closing costs)
To afford a home at today's price, many buyers are having to get more creative. For example, recent polling from Bank of America shows that half (56%) of those interested in purchasing a home are considering a side gig to help save more money. Most are also willing to sacrifice location, size, and outdoor space to find a home.
Despite affordability challenges, first-time buyers account for nearly half (45%) of all home purchasers in the U.S. — most recent buyers still believe the benefits outweigh the costs.
To understand how today's buyers are pursuing their dreams of homeownership, we asked dozens of homeowners how they managed to save up for a down payment. Here are 28 of their most intriguing ideas, ranging from practical savings tips to unconventional side gigs.
1. Start by paying off your debts
"I'm a big believer in the snowball method of debt repayment, where you devote extra money each month to paying off your smallest debt first, then move on to the next-biggest one with your extra money, plus whatever you were paying on the smallest loan," says Melanie Hanson, editor in chief of EDI Refinance.
An alternative approach to debt repayment is called the avalanche method. This strategy involves paying off your highest-interest debts first, since interest can greatly inflate the amount you owe.
Once you become debt-free, Hanson continues, "a savvy next step is to put all of that money into savings each month. This strategy requires you to stretch your budget a little bit at first, but it will result in huge savings by the end, all without drastically changing your spending habits."
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2. Pocket your windfalls
"What do you do with your tax returns, holiday bonuses, and stimulus checks?" asks Bill Ryes, a certified chartered financial consultant and board advisor at Fiona.
According to the IRS, the average tax refund in 2021 was $3,039. Career site Zippia estimates that the average holiday bonus is 5.6% of an hourly worker's annual pay (even more for exempt and salaried employees). Rather than spending these bonuses, Ryes advises transferring them to a savings account for your down payment.
In addition to tax refunds and bonuses, you can also use money you receive from special events like birthdays. "In lieu of wedding gifts, birthday presents, or other gifts for other occasions," says Martin Carreon of Soco Wine Country Properties, "many homebuyers have had success asking friends and family for cash gifts toward their down payment."
3. Use a budgeting app
Chris Muller of Money Under 30 recommends using a budgeting app to track your spending: "This will help you see where your money is going, and it can help you find ways to save more!"
Budgeting apps typically connect with your banking and savings accounts and help you track your spending across various categories, like groceries, entertainment, rent, travel, and more. Most apps let you set monthly limits on various spending categories and alert you when you're approaching that threshold. Some connect to your investment accounts to get a complete snapshot of your financial picture. A few apps even let you budget with a partner.
4. Try different savings hacks
"My husband and I started the $1 savings plan about three years ago, and it is a game changer," says Kristina Knight, a freelance writer for BizReport. "This plan makes it simple to save without feeling like you’re missing out on eating out and the like."
The $1 savings plan goes like this: Starting the first week of the year, you put $1 into a savings account. Every week after that, you double the amount you put in. By week 15, you're contributing $15, and by week 20, you're setting aside $20, and so on. At the end of the year, you've saved $1,330. For extra savings, modify the amount you start with at the beginning of the year.
"There are three of us in our household, so the first year we saved $3 for every week of the year ($1 for each of us)," says Knight. "That year, our savings was $3,990. It was hard – but we did it. We’ll keep modifying and coming up with new challenges."
5. Automate your saving contributions
To make saving easier, automate your contributions, advises Jeremy Wagner, a financial analyst at Trading Pedia. "This could mean setting up a direct deposit from your paycheck into your savings account or making regular transfers from your checking account to your savings account." You can also use a savings app that rounds up your purchases and transfers them to a savings or investment account.
Rather than making a deliberate choice every paycheck, says Wagner, "automating your savings could help you reach your goals more quickly."
6. Think outside the traditional savings account
"When most people think of saving for a down payment, they assume they need to open a savings account and let the money sit untouched until they’re ready to buy," says Wagner. "But there are other options that may make more sense for your situation."
Rather than let your money sit idly in an account, says Wagner, "you could open a high-yield savings account, which typically offers better interest rates than traditional savings accounts. Or you could invest in a short-term bond fund, which is relatively low risk and can offer higher returns than cash."
7. Consider Series I savings bonds
During times of high inflation, economist Danetha Doe of Money & Mimosas recommends putting your money in a short-term Series I savings bond. "These are Treasury-backed savings accounts, and the rate of return is set against inflation," explains Doe. "So the interest rate is going to be higher than the inflation rate."
The interest rate on Series I savings bonds purchased through October 31, 2022 is 9.62%. You can purchase up to $10,000 in Series I bonds in a given calendar year and cash out the bonds as soon as one year later. Just keep in mind that if you cash out before the 5-year mark, you forfeit the previous three months of interest.
8. Explore stock and bond investing
"Investing your money can be a good way to save for a downpayment on a house," advises Shawn Plummer, CEO of The Annuity Expert and a certified financial professional.
While the stock market can fluctuate dramatically, the average historical rate of return over the past 50 years has been 7 to 10% per year, depending on how you slice it. Compare that to the 1-2% you'd get from putting your money in a high-yield savings account. At a rate of 10%, you can expect your investment to double every 7.2 years.
"If you're unsure about investing, you can learn more about mutual funds, stocks, and bonds," advises Plummer. "You can also check out online investing platforms like Betterment or Robinhood."
9. Ditch your credit cards
"Let's face it, that credit card in your wallet is just a temptation to spend money on things that you don't need," says Colin Palfrey, chief marketing officer at Crediful. "It comes with the added danger of interest charges if you don't pay the balance in full each month. You could end up paying more in interest than the items you bought."
In fact, would-be home buyers consider credit card debt an even greater barrier to home buying than what they owe on their student loans. Rather than charging up your credit card, Palfrey suggests keeping track of your spending by paying in cash or with your debit card. After all, if you don't have it, you can't spend it.
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10. Temporarily downsize
"One of the most significant monthly expenses people face is rent," says senior financial consultant Shaun Connell. It can account for the lion’s share of your monthly expenses and make saving for a down payment far more complex. But if you are serious about amassing money to purchase a home, temporarily downsizing your living arrangements is a sacrifice that can make sense."
Downsizing could look like getting a roommate for a period of time or moving back in with family. With the average rent for a 2-bedroom now at $2,105, compared to $1,769 for a one-bedroom, doubling up to cut costs could save you close to a grand each month.
11. Get a commission-based side hustle
"Skipping your morning latte won’t help you make a downpayment," says Johannes Larsson, founder and CEO of financer.com. "I do recommend living within your means, but living an austere life doesn’t count in smart budgeting. People with an upcoming down payment need to have a consistent supplementary income that can help them accumulate funds for the down payment."
As a starting point, Larsson recommends looking into jobs offering a commission or performance-based pay model, which rewards you for the amount of work you put in and the milestones you achieve. Jobs in sales are typically structured this way, as are gigs like ridesharing and grocery delivery, which offer more pay for more hustle.
That said, if a high-pressure sales job isn't for you, there are plenty of other options out there — ranging from freelancing to more traditional side gigs like food service, retail, or delivery driving.
12. Monetize your skill set
Turn something you're good at into steady freelance work. Common freelancing gigs include writing, graphic design, video editing, social media and email marketing, virtual administrative assistance, web design, accounting, translation, data entry, transcription, resume writing, and event planning.
You can find potential clients through online freelancing platforms such as UpWork and Truelancer, or via social media forums like Facebook and LinkedIn.
Pay for freelance work is often on an hourly or per-project basis. Many freelance writers charge by the word. A recent study by Side HustleNation found that the majority of side hustlers make well over $500 per month in extra income.
13. Become an online tutor
Online tutoring offers a fairly consistent way to make extra cash. Ling App founder Simon Bacher says you can earn as much as $50 per hour as an English language tutor. Other popular tutoring subjects include math, science, AP subjects, SAT/ACT prep, foreign languages, and writing. Many tutoring platforms also provide college prep, which involves helping students put their best foot forward on college applications and personal essays.
Varsity Tutors and Wyzant are two popular platforms for online tutoring, with pay averaging $15 to $30 an hour.
14. Sign up for TaskRabbit
TaskRabbit may be for you if you prefer a more active side hustle. While some "taskers" perform skills-based work like plumbing or repair services, others offer help with manual tasks like packing, moving, running errands, assembling furniture, hanging pictures, dog walking, cleaning, and organizing. The great thing about TaskRabbit is that the platform allows you to set your own rates — meaning you can charge however much you think your time is worth.
Most taskers charge $15 per hour and up, with more skilled or physically demanding tasks commanding $35+ an hour.
15. Sell used goods online
You can sell items online through platforms like eBay, Amazon, or Facebook Marketplace. These might be personal items, like clothing or furniture, that you no longer use. Or, they could be items that you find for cheap and resell at a higher price.
In San Diego, a web developer saved up for a downpayment by scouring local auctions for everyday household items like vacuum cleaners, bicycle parts, and rugs. By buying in bulk, he was often able to resell the items individually for 25–75% more.
When it comes to shopping and returns, some platforms are more friendly to sellers than others, so be sure to read the fine print when you're setting up a seller's account.
16. Launch an Etsy store
For those with a flair for arts and crafts, Etsy is a popular platform for selling your wares online. Some of the most popular Etsy items for sale include decorative notebooks, jewelry, home decor, graphic designs, greeting cards, clothing, bags and purses, candles, stickers, and baby items. Here again, you can set your own prices for the goods you sell. Just be sure to set aside enough from your earnings to cover taxes at the end of the year. A quick Google search will turn up multiple guides for getting started as an Etsy seller.
17. AirBnb your spare bedroom
While AirBnb is often thought of as a platform for homeowners, renters also can take advantage as long as it doesn't violate their lease.
"A friend of mine originally rented an apartment with her boyfriend, and it had a semi-separate bedroom and bathroom suite," recalls Brian Davis, a real estate investor and founder at
SparkRental.com. "After they broke up, she originally thought about renting out the other bedroom full-time, but then she realized that she could cover nearly all of her rent if she could rent out the other suite at least six nights per month on Airbnb. By knocking out most of her rent (all of it in some months), she was able to save up a down payment to buy her own place very quickly."
Davis has also known friends who've rented out their entire homes on Airbnb and just crashed with their significant other or family on the nights when they're booked. Others list their homes for rent while they're traveling or visiting people out of town. "All of these are just variations on house hacking," Davis says.
18. Cut out unnecessary expenses
The average U.S. household spends $3,000 a year eating out. To help save money, real estate investor Brian Davis and his wife have begun doing date nights in.
"Now, instead of meeting with friends out at restaurants, we either invite them over for dinner or propose meeting at their houses," says Davis. "Everyone brings a course and a bottle of wine that pairs with it, and we all end up saving a huge amount on entertainment."
He and his wife take the same approach with work lunches. Rather than spending $10 for lunch out of the office, he and his wife cook double portions for dinner, and simply take leftovers for their lunches the next day.
19. Become a pet sitter
For many pet owners, hiring a private pet sitter is an attractive alternative to the less personalized care their four-legged friends might receive from a traditional boarding facility. If you have a heart for animals, pet-sitting and dog walking could make for a rewarding side gig. Sites like Rover let you post your profile and advertise to neighbors looking for pet care in your area.
Many pet sitters on Rover charge $50 or more per day for pet sitting and $15-plus an hour for dog walking.
20. Take a few passengers on your next road trip
If you don't mind driving, you can make some serious cash through peer-to-peer shipping platforms like CitizenShipper, which connect sit users to transportation providers who transport everything from furniture to pets.
To get setup with the platform, you'll need to pass a screening and background check. If you have a safe driving record, reliable vehicle, and room for extra passengers, you could earn as much as $6,000 to $10,000 per month driving other people's precious cargo across the country.
21. Work remotely? Why not move abroad?
To save up for a down payment, marketing account manager Ariel Sheen persuaded his employer to let him work from abroad. "Staying at AirBnBs in Mexico, Colombia, Argentina, Peru and Chile for a few months at a time – even when factoring in flights between countries and the cost of storing my things – will allow me to save $1,700 more a month than were I to be living in the U.S."
Based on the napkin math, Sheen says, "I'm essentially giving myself a $20K a year raise plus the opportunity to travel on the weekends, which most Americans wait to do until they are of retirement age."
A number of countries offer residential visas for remote workers. However, the requirements vary by country, so you'll need to do your research before picking up and moving abroad.
22. Take advantage of assistance programs
More than 2,500 assistance programs are available to first-time and repeat home buyers in the U.S. State housing finance agencies administer many of the programs, but independent programs also exist through nonprofits and private lending institutions.
"These programs can vary from state to state, so it's worth doing some research to see what's available in your area," notes Jennifer Spinelli, founder and CEO of Watson Buys. "Some programs may offer grants or loans that don't have to be repaid, while others may offer deferred-payment loans that only have to be repaid once you sell the home."
While different programs have different eligibility requirements, you may qualify for $20,000 dollars or more to help with a down payment and closing costs.
23. Budget like you've already bought
"A budgeting hack that I find works great for saving for a downpayment (and also the cost of the mortgage payment that comes after) is to play a little trick on your brain," says Chloe Elise, certified financial coach and CEO and founder of Deeper Than Money.
"Let's say you want to buy a home worth $250,000," Elise continues. "Using a mortgage calculator, you determine that your monthly mortgage payment for that home will be $1,400/month. Let's say your current rent is $900/month. The difference in that monthly payment is $500/month."
Knowing your future mortgage payment, you can kill two birds with one stone: "Saving for a down payment AND preparing yourself for this increased monthly payment," Elise says.
Elise suggests channeling that extra $500/month into a brokerage account and making conservative investments, especially if you plan to buy the house a few years down the road. If you plan to buy a home sooner, Elise advises, you can put those funds into a high-yield savings account, which carries less risk.
"Once the down payment is saved," Elise concludes, "not only are you ready to put that toward the purchase of your home, you are also in a better situation because now you're in the habit of setting aside that extra $500 per month, and can redirect that money towards your mortgage payment."
24. Open a matched savings account
You can find down payment help with matched savings accounts, also known as individual development accounts (IDAs), advises Richard Mews, CEO of Sell With Richard.
With this type of program, buyers deposit cash in savings accounts with a financial institution, community group, or public institution. This organization then matches any deposit paid by buyers. Buyers can then use the total money for their down payment.
So, for instance, when a home buyer deposits $5,000 in cash, the organization they are collaborating with will deposit an additional $5,000 into the account. The $10,000 will now be available for the buyer to use as a down payment.
25. Use gift money
"In some situations, your down payment can consist of a gift from a relative or another person you have a close relationship with," suggests Corey Tyner of Buy Yo Dirt.
Earlier this year, Fannie Mae expanded the list of allowable sources of a payment gift to include immediate and distant relatives, including godparents, fiancees, former relatives, domestic partners, and domestic partners' relatives.
"In 2020, more than 40% of homebuyers who had mortgages financed a portion of their down payment using gifts or family loans," notes Martin Carreon of Soco Wine Country Properties.
"You must first ascertain whether your lender and mortgage type let you use a gift as
a portion of your down payment," says Tyner. "You might also need to submit a letter and a paper trail for the gift money to verify it isn't technically a loan."
Lenders may also require you to contribute at least some of your own money to a down payment.
26. Explore your financing options
Different loans come with different minimum down payments, and not all lenders require the same amount of cash to close. Sometimes, like in the case of a VA loan, you may not need to put money down at all.
"There are some lenders that might only require 3% down," says realtor Omer Reiner of Florida Cash Home Buyers. "If you can shave off even 1% from your down payment, then it makes it that much easier to save," says Reiner.
A 3% down payment on a $400,000 home is just $12,000, compared to $40,000 if you were to try to save up 10%. However, putting down less upfront may require a higher credit score and possibly leave you on the hook for a higher interest rate, so be sure to have your lender walk you through multiple scenarios.
While you're thinking about applying for a mortgage, also pay attention to your credit score. With better credit, lenders may be willing to let you put less money down. And, as an added benefit, a better credit score will usually result in a better interest rate — saving you extra money every month over the life of your loan.
27. Try a house hack
"The best way to afford a home purchase sooner rather than later is to house hack," suggests Phil Greely, a real estate broker with Realogics Sotheby's International Realty. "House hacking involves renting a portion of the property to tenants or roommates while also living in the property. You qualify for owner-occupied mortgage rates AND you have rent payments helping to cover most or all of your mortgage payment every month.
With an FHA loan, you can qualify for a property with as little as 3.5% down, allowing you to get in earlier as opposed to waiting until you've saved 20% for a down payment. "If you don't like the idea of roommates, you can also purchase 2, 3 or 4-unit properties using that same type of loan," advises Greely. "Live in one unit and rent out the rest. House hacking is the cheat code to building wealth."
28. Ask a seller to help cover your closing costs
The recent rise in interest rates has caused a steep dropoff in buyer demand, so many sellers are contributing thousands of dollars toward buyers' closing costs to help sweeten the deal.
Not only can this help you cover the upfront expenses associated with your loan — it may help you get a better interest rate through a lender incentive known as a rate buydown.
How one enterprising home buyer transformed ideas into action
While none of these strategies will get you a down payment by tomorrow, adopting a few different approaches and sticking to them may offer a surprising return. Just take it from recent home buyer Sckylar Gibby-Brown, owner and author of Adventuring Dreamers.
"A few years ago when my husband and I were looking to buy our first home, we needed $10,000 for the down payment," says Gibby-Brown. "As two recent college graduates, we didn't have that in savings yet and had to use some creative ways to come up with the money."
"The first thing we did was ask for help," recalls Gibby-Brown. "We don't come from rich families, but my mom was willing to donate a few thousand dollars as a wedding gift, which helped out tremendously."
"Next, we turned to savings strategies," the professional blogger continues. "We put aside as much of our paychecks as we could afford, and I started doing a savings hack that I'd seen online and it really helped me out. Every time I went to a grocery store and made a purchase, I asked for $5 or $10 cash back. The small amount of cash back was negligible as far as my spending went. I could have easily spent that same amount on impulse items and never noticed. But, I immediately put that money into our down payment savings and was able to save extra amounts per month without feeling any scarcity like I would have if I'd taken that extra $100 a month out of my paycheck directly."
Finally, she and her husband both took on side hustles, including donating plasma and testing websites on platforms like User Testing. As a writer, Gibby-Brown also found freelance work through various online platforms.
"Combining multiple strategies to bring in extra income and save," concludes Gibby-Brown, "we were able to come up with the full down payment and move into our first home."