This Is How Many Years It Would Take You to Save for a Down Payment in an Average U.S. House in 2023

Here is how you can save faster for a down payment.

According to the U.S. Census Bureau (as reported by the Federal Reserve Bank of St. Louis), the average cost of a U.S. home in Q4 2022 was $535,800. This hefty price tag can be daunting when you're saving up for a down payment to buy a home. How long is it going to take you to save the necessary amount? Here is what you need to know and how long the process might take.

Saving for a down payment in 2023

Ideally, you should aim to save around 20% of the total purchase price of the home. For a home that costs $535,800, this means you will need $107,160 saved up as a down payment. It may seem impossible to save up such a large sum of money from scratch, but with careful planning and dedication, it is achievable.

If you're an active duty or retired service member and qualify for a VA loan, your required down payment may be as little as 0%. The minimum down payment for an FHA loan can be either 3.5% or 10%, depending on your credit score. However, your monthly mortgage payment will be higher with a smaller down payment, so you will need to take that into account.

How much can you save?

Once your budget is sorted out and you have identified how much money you can realistically put aside every month toward your down payment, you can figure out how many years it would take you to reach your goal. For example, if you are able to save $500 a month, and assuming that you can get 3% APY in a high-yield savings account, it would take more than 14 years to save $107,160.

How to save faster

The first step is to make sure your finances are in order. You need to have a budget that accounts for all your expenses and leaves enough money left over to save each month toward your home down payment. If your current salary isn't enough to cover this savings goal, it might be time to look into other income streams or ways of increasing your earnings (such as working overtime or starting a side hustle).

In addition to finding additional income, you can open a brokerage account to invest part of the down payment in a more aggressive fund to get a higher return. If you are able to save $1,000 per month and decide to invest the funds and earn 8% per year, then it would take about 7 years to save. Note, however, that if the home appreciates 5% per year, then it would take about 15 years. There are some downsides to this approach, as you may lose some of your principal if an investment goes down. So the closer you get to purchasing your home, look into reallocating your funds into more conservative investments to protect your money.

Depending on how much money you are able to put away each month and any additional income streams that come into play, it could take years to save up. So it is important to be patient and disciplined when saving. However, with careful planning and budgeting, it is possible to save up enough money for a down payment on an average U.S. house at today's prices, it just depends on how much money you can realistically put aside each month and any additional income streams available. With the right approach and perseverance, this goal is within reach.