How much do you really need to save for a down payment?

There's a lot of confusion that exists out there, about how much do you really need.

In fact, when millennials were surveyed and asked, How much money do you need to save for a down payment?

Millennials responded with the average coming back at 32%. Millennials thought that you need to have a down payment of 32%.

But the reality is that people are only putting down 5.3%.


So how can that be?

Where is the disconnect?


In this article, we're going to cover the three reasons why it's so hard to save for a down payment, don't make it harder:

  1. Appreciation
  2. Inflation
  3. Motivation

When we talk to potential Homebuyers, they typically think they need 20%. That's the number that we usually see from home buyers out there.

But then, to see these numbers think you need a 32% down payment, when on average home buyers are only putting down 5.3%. And look, in our own neighborhood, we've helped a number of buyers buy with zero down.

There's a lot of programs where you can buy with 5%, 3% even 0% down.

So how can this be? Where's the disconnect from this?

Well, if you keep thinking you're going to try to save up for a down payment, whether that's 20% down payment or a 32% down payment...

If you keep trying to save for that, it feels like you're chasing a ball down the hill. The ball is just going to pick up more and more speed and you're never quite catch up. 

Well, why is that?

Here are three things you should think about when it comes to saving that down payment:

3 three reasons why it's so hard to save for a down payment:


1. Appreciation

Appreciation doesn't mean that you appreciate the value of the money and the value of the home.

It means how the home value goes up. 

So let's say you're looking at homes for sale for around $400,000 in our area.

In Snohomish County that is pretty typical, pretty normal, pretty average. And let's say that the home values are going to go up about 7% over the next year. 

This means you need to save $28,000 just to keep pace just to buy the same house next year.

You're gonna have to save an additional $28,000. In the next year!


Does that make sense?

So if you're looking at a $400,000 home, it goes up 7% in value. You need to save $28,000 more this year just to keep pace.

A lot of people can't save that type of money, so the question becomes: Can you save that much money, or are you just spinning in your wheels, delaying, getting something that you could get right now?


2. Inflation

Inflation is the reason why 20 years ago you could buy a candy bar for 50 cents and a can of Coke for 50 cents, and now it costs a $1.50.

But most people just think the costs of things increase every year.

But the way to think about inflation is the value of your dollar decreases almost every single year. It's not necessarily the cost of things increasing. It's the value of your dollar is decreasing.

So something to consider moving forward with what happened this year. And as the government's pumped in trillions of dollars into the economy: Do you think your dollar is going to be worth more or less over the next few years?


3. Motivation

The third reason why it's so hard to save for a down payment is motivation.

We've talked about appreciation, home values going up. It feels like you're chasing a ball down the hill. We've talked about inflation, the value of your dollar is going down every year.

This brings us to motivation.

It's hard to stay motivated with appreciation and inflation going on. So you get to a point where you're we have $10,000, $15,000, $20,000 saved up and now wonder "Is it even worth it?"

I'm saving money. But the home that I wanted to buy last year is now worth $28,000 more. Maybe I should just buy a new car or go on a nice vacation or go out to a nice dinner.


The three reasons why it's so hard to save up for a down payment, and probably why it doesn't actually make sense to try to save up for that 20% or even 32% down payment.


As I said, there's plenty of programs out there where you could get into a home for much, much less down payment.

If this is something that you're interested in and you want help figuring out how much money do you need to save, what's the right down payment for you based upon what you're looking for in your next home visit

And another thing I'd ask if this was helpful or you know someone that is struggling with one of these things and they want to buy, share this article with them.



Darin Persinger has been a licensed Realtor since 1997, but this wasn't the start of his real estate career. In high school, Darin started a "yard sign" business for the local real estate agents. In the dead of winter in Wisconsin, Darin drove around his Dad's little Dodge Ram truck installing real estate yard signs. He now helps clients buy homes andsell real estate in Snohomish County with his wife Katherine