The price of a house in America has recently skyrocketed. Among the reasons are mortgage rates, which have been near historic lows (which have started to change recently). Another reason is that people have moved from expensive coastal cities like New York and Los Angeles to inland locations with lower real estate prices and an overall lower cost of living. Finally, the COVID-19 pandemic has allowed millions of people to work permanently away from their desks.
Depending on income and house price, down payments vary. A small number of people qualify for no down payment mortgages. Most of them have taken out loans guaranteed by the government. The lender can take great risks with these because the homeowner starts out with no equity in the home.
Zillow considered the median income of renters in the United States in March 2021 of $3,855 per month and savings of 2.4% of income. Based on these numbers, it would take over 26 years to fund that 20% down payment for a typical starter home priced at $148,527. While you might think that at this rate you might as well be saving for a retirement home, there are options.
The down payment also depends on where people are looking for a home. To determine which metro area residents can save for a down payment fastest, 24/7 Wall St. looked at RentCafe’s 2022’s Best Metros Where Renters Can Save Fastest for Their First Home report.
In 20 metropolitan areas we looked at, the median household income is high enough and the price of a first home is reasonable enough to shorten the time it takes to save for a down payment. It only takes a little over three to a year to save up for a down payment at the metros on the list.
In Bloomington, a town in central Illinois, a first home costs $105,249 and the median income for two people is $91,669. In this metropolitan area, you could move into a house in just 12 months, provided you set aside 22% of your income each month.
Here are the details from Bloomington:
> Time needed to save for a down payment: 1 years, 0 months
> Typical down payment for a home: $21,050
> Typical price of a first home: $105,249
> Median household income, family of 2: $91,669
> Percent. income going to savings: 22%
Methodology: To determine which metro areas residents can save for a down payment the fastest, 24/7 Wall St. looked at RentCafe’s 2022’s Best Metros Where Renters Can Save Fastest for Their First Home report.
The report determined how long it would take a couple to save for a down payment based on the metro area median income using data from the US Census Bureau’s 2019 American Community Survey, the price of a Typical first home based on Zillow data, and the percentage of income that can go to savings.
The amount each couple could save as a percentage of income was based on the Economic Policy Institute’s Family Budget Calculator (median rental costs for each census metro replacing housing costs) and additional expenses based on the Bureau of United States Labor Statistics – Consumer Expenditure Survey, 2018-2019.
Click here to read Best Cities to Save Fast for a Down Payment on a New Home