How Much of Your Income Do You Need to Save For a Down Payment Based on Where You Live?

Making the transition from renter to homeowner isn’t easy and it definitely isn’t cheap. Unless you happen to have a pretty sizable liquid income chances are you are skimping and saving for that dream home down payment on top of paying your existing rent and taking care of whatever bills or expenses come your way.  

Of course not all home buyers opt to put down that steep 20% to secure their home loan. Some banks can offer mortgages with lower down payment options, and some FHA loans require as little as 3.5% down! A substantially lower down payment might sound great now, but keep in mind that putting less than 20% down means that you might not get get the lowest interest rate and could also could also wind up paying a monthly mortgage insurance fee.

Source: FHA

Getting to that 20% down payment can take years, maybe even longer depending on where you live or want to buy. Income, cost of living and home purchase price can have a dramatic impact on how long it takes you to save for that dream home down payment.

Here are the cities where home buyers need to save the highest percentage of income to cover a 20% down payment:

Los Angeles, California
Median 20% down payment: $118,000
% of income needed to save: 182%

San Jose, California
Median 20% down payment: $192,320
Percent of income needed: 182%

San Francisco, California
Median 20% down payment: $164,920
% of income needed: 180%

Source: University of San Diego

San Diego, California
Median 20% down payment: $105,300
% of income needed: 152%

New York/Northern Jersey
Median 20% down payment: $80,100
% of income needed: 114%

Riverside, California
Median 20% down payment: $63,640
% of income needed: 111%

Sacramento, California
Median 20% down payment: $70,040
% of income needed: 108%

Source: Travel Portland

Portland, Oregon
Median 20% down payment: $70,360
% of income needed: 107%

Seattle, Washington
Median 20% down payment: $82,520
% of income needed: 106%

Boston, Massachusetts
Median 20% down payment: $81,680
% of income needed: 101%

Think You Need a 20% Down Payment? Think Again

We’ve all heard that you should put a 20% down payment on a new home, and for many people, that puts purchasing their first house squarely out of reach. In fact, in a recent study, 25% of people said that this was the number one factor holding them back from home ownership. However, this may not be true anymore. In fact, the average down payment on mortgages in the U.S. is only 11% now.

Source: Prosperity Home Mortgage

This does depend on where you borrow from, however. Some lenders require huge down payments, while government-backed loans like FHA, VA, and USDA all featured payments of less than 5%. They’re open to speciality cases, like veterans, first-time buyers, and heads of households in rural areas. Where you’re buying can also be a factor, with higher-cost homes often requiring a higher percentage down payment. This is often because the monthly payments in such a market are simply too high without a lot of money down.

Source: SaveUp

The differences are stark when you break it down in numbers. The average down payment (at 11%, remember) is about $32K. However, in San Francisco County, buyers put down an average of a whopping $326K, which is just around 32% of total cost of housing there. This is one of the highest priced regions in the U.S. – compare it to Tipton County in Tennessee, where the average down payment is $3.5K. And in that county, most of the loans issued are FHA, VA, and USDA.

Bottom line: 20% down isn’t a hard and fast rule, depending on where you’re looking to buy.