Dear Chuck,

My fiancé and I are making slow progress in saving for the down payment of a home. Can you help us with a better plan? 

Saving for a First Home

Dear Saving for a First Home, 

I applaud you for setting a goal to own a home, saving money for the down payment, and making plans before you are married to pursue your goals together—well done! I do have some advice and information that will be helpful to achieve your goals.  

Buying a house can be a great decision early in life—if purchased right. It is not a decision to be rushed. Homeownership remains one of the largest and most important assets for the majority of Americans. Be patient and content as you make steady progress. 

“For I have learned in whatever situation I am to be content.
I can do all things through him who strengthens me.”

– Philippians 4:11b,13 ESV

Location will have a major impact on the needed down payment. Realtor.com reports that the median down payment for homes purchased from July to September averaged 14.5%, or $30,300, down from last quarter’s historic peak of 14.9%, or $32,700. The drop can be attributed to the fact that fewer homebuyers have more leverage. The smallest down payments occurred in affordable areas with plenty of inventory. San Antonio, TX, and Virginia Beach, VA, topped the country with the lowest money down. They are military markets where buyers can use a VA loan, which requires as little as a $0 down payment. 

California, on the other hand, is home to four out of five cities with the highest down payments. It is one of the most expensive housing markets in the country. Boston, MA, #4, joins cities that tend to have wealthier, higher-earning residents capable of putting more money down on a home. 

More buyers depend on inheritance. A survey by the National Association of Realtors found that Americans who bought homes between June 2023 and June 2024 were older and wealthier than in previous years. A record number used an inheritance to help with the down payment on their first home purchase in 2024. Repeat buyers are older and have greater down payments than first-time consumers.

Tips to Accelerate Your Goal for a Down Payment

• Set a financial goal and deadline.
• Designate a down payment in the wedding or future baby registry; know the rules for gifts.
• Downsize temporarily: live with relatives, get a roommate to share costs, or move to reduce your current living costs as much as possible.
• Automate savings: CDs/high-yield accounts, deposit windfalls, bonuses, and tax refunds.
• Increase income: get a part-time job, sell unnecessary items, etc.
• Reduce debt and spending.
• Research down payment assistance programs:
  • FHA down payment grants for 2024 
  • VA loan down payment information
  • First-time homebuyer programs

Expenses other than down payment:

• Closing costs 
• Mortgage reserves
• Moving expenses
• Remodeling and maintenance
• Emergency fund
• HOA fees

How to get the best mortgage rates: 

• Save consistently for a down payment. 
• Improve your credit score.
• Establish steady employment. 
• Reduce your debt-to-income (DTI) ratio.
• Research mortgage types/terms, discounts, and assistance.
• Determine the advantage of paying points to reduce rates or refinancing when rates drop.
• Shop around then lock in your rate.
• The calculators here and here are helpful.

Big homebuilders offer buydowns (lower mortgage rates) to attract buyers. It’s a way to move inventory without having to drop prices. Buyers can benefit from lower interest rates for the first few years while preparing for the permanent rate to lock in. This explains how it works. 

Before You Buy Your Home

I recommend you have 20% or more for a down payment before buying a home. Devote no more than 28% of your gross monthly income to a mortgage or 36% to overall debt. Less debt is always best. 15-year mortgages will save you lots of money. Being ready to buy your first home may take much longer than you expect. Be very patient as mortgage rates and real estate values change dynamically. Being careful is far better than becoming house poor. 

Some couples strategically use only one spouse’s income for mortgage qualification purposes so they can save and invest with the other. This provides margin during childbearing years and any income interruptions.  

Adopt conservative spending and saving habits now. Do not abandon these when it comes time to buy. You will start your marriage off with less stress and enjoy your life more even if you are never able to buy a home. 

If credit card debt is a financial strain for you or your fiancé, consider addressing that together now by reaching out to Christian Credit Counselors, a trusted partner of Crown. They are a valuable resource to help consolidate debt and get on the road to financial freedom.

This article was originally published on The Christian Post on November 29, 2024.