It’s still true. Down payments have been the No. 1 barrier to buying a home for first-time buyers. Millennials (age 24 to 39) tend to have more trouble getting the cash they need for a down payment than their parents had at the same life stage due to higher student loan debt and lower personal income.
With 56% of older millennials ready to buy a home in the next three years, the struggle continues with how to save for a down payment. Because saving for a down payment to buy a house can seem overwhelming, we recommend that you break it down into small, reasonable moves, that may take a while to accomplish but you might be able to save enough to afford a home sooner than you expected.
Most lenders are looking for a 20% or higher down payment on a conventional loan, but there are options where you can put down much less. However, consider with a smaller down payment, you’ll likely be required to pay for mortgage insurance. That protects the lender from you defaulting on the loan and it increases the amount of your monthly payment. If there is no mortgage insurance requirement, there can be other upfront or ongoing fees. Be aware of loan costs.
Whatever your down payment goal, it can help to create a multi-tiered approach. Try these savings tactics:
Use non-traditional and out-of-the box methods to get the cash you need for your new nest.
Now that you have a plan to save for your down payment, where do you put the cash? Keep the money out-of-site and out-of-mind by investing in one of these short-term options for a greater return: