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build your savings for a new home
Simplify your finances with AAA’s savings products and services, which can help you save for a down payment on a home or car, plus all of your other future financial needs.
Buying your first home is an exciting milestone, but saving enough money for a down payment can feel like one of the biggest hurdles. Whether you're just starting to think about homeownership or you're actively house hunting, understanding how a down payment works and creating a realistic savings plan can help you get closer to making the purchase.
A down payment is the portion of a home's purchase price that you pay upfront, typically at closing. The remainder is generally financed through a mortgage.
So, if you purchase a $400,000 home and put 10% down, your down payment would be $40,000, and you'd finance the remaining $360,000, before considering other costs.
In most cases, first-time homebuyers need a down payment, although the amount required varies, depending on the type of mortgage and your financial circumstances.
There's no one-size-fits-all answer when it comes to a down payment. While 20% has typically been considered the ideal down payment, many first-time buyers put down considerably less. Depending on the mortgage program and your financial situation, you may be able to buy a home with a down payment of just a few percent.
Putting less money down can help you reach your homeownership goal sooner, but it can also mean a larger monthly mortgage payment and, in some cases, mortgage insurance.
Before deciding how much to put down, consider the full cost of buying and owning a home, including:
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Watch NowThe first step is to establish a savings goal. Research home prices in the areas where you'd realistically consider buying and estimate a down payment based on the type of mortgage you might qualify for.
Factor in other upfront expenses, including:
Once you have a target, turn it into a monthly savings goal. A dedicated savings account can make it easier to keep your down payment money separate from everyday spending. Consider setting up automatic transfers from each paycheck, so you save before you have a chance to spend the money elsewhere.
Yes. First-time homebuyer down payment assistance programs may be available through state and local governments, nonprofits and other organizations.
Depending on the program and your eligibility, assistance may come in the form of:
Eligibility requirements vary, and some programs have income, purchase price or location restrictions. Doing this research early in the homebuying process can help you tailor your search criteria.
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Maximize Your SavingsEarnest money is a deposit you make when you submit an offer on a home to show the seller that you're serious about buying. It is different from a down payment.
However, earnest money may ultimately be credited toward your down payment or closing costs, depending on the terms of your purchase agreement. If the deal falls through, what happens to the earnest money depends on the reason for the cancellation and the terms of the contract.
Because earnest money can represent a significant amount of cash you'll need before closing, make sure you understand how it works before making an offer.
Saving for a down payment is important, but it's only one piece of the financial puzzle. A home inspection and an appraisal will likely be required before closing, and their costs are typically the buyer's responsibility.
Buyers should also consider how the following will fit into their monthly budget:
The goal isn't simply to save enough money to buy the house—it's to save enough that you can afford to live comfortably once you own it. A realistic budget, consistent savings and research into available assistance programs can make that first step toward homeownership feel much more manageable.
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Join Today!A down payment is the portion of a home's purchase price you pay upfront at closing. For example, if you buy a $400,000 home and put 10% down, your down payment is $40,000, and you finance the remaining $360,000 through a mortgage.
While 20% has traditionally been considered the standard, many first-time buyers put down considerably less. Depending on the mortgage program and your financial situation, you may qualify with putting down just a few percent. Keep in mind that a smaller down payment often means a higher monthly mortgage payment and, in some cases, mortgage insurance.
Start by researching home prices in your target area and setting a realistic savings goal. Factor in closing costs, moving expenses, furnishings and immediate repairs. Open a dedicated savings account and set up automatic transfers from each paycheck to build your fund consistently.
Yes. State and local governments, nonprofits and other organizations offer down payment assistance programs. Depending on your eligibility, help may come in the form of grants, forgivable loans or deferred loans. Some programs have income, purchase price or location restrictions, so research these early in your homebuying journey.
Earnest money is a deposit you make when submitting an offer to show the seller you're serious—it's separate from your down payment. However, depending on your purchase agreement, it may be credited toward your down payment or closing costs.
Saving for a down payment is just one part of the financial picture. You'll also need to budget for a home inspection, appraisal, property taxes, homeowners insurance, utilities and ongoing maintenance. The goal is to save enough to buy the home and live comfortably once you own it.
build your savings for a new home
Simplify your finances with AAA’s savings products and services, which can help you save for a down payment on a home or car, plus all of your other future financial needs.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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