It’s no secret that home prices are rising and have been for some time. In Q3 2003, the average home price in the U.S. was $248,100. Twenty years later, you'd pay $513,400. While that equity gain is terrific for homeowners (see related article), high entry-point costs are making it more difficult each year for some people to buy.

To put 20% down on that “average” home, you’d need to have $103,680 saved up, plus enough left over in your bank account equal to several months of mortgage payments. Of course, this is during a time when we’re all paying more for just about everything and salaries are barely keeping up with rising costs of living.

How to Move Forward in 2024

If you’re thinking about buying a home in 2024, start early by evaluating how your income and savings will change over time, and what additional expenses you may incur when becoming a homeowner. If you plan to save thousands of dollars for a down payment or other expenses, you may need to earn additional income, cut expenses, or both.

Work with an AMS Military Mortgage Advisor who is ready to help you at every step, to determine how much home you can afford, how much (if any) you’ll need to put down, and your savings and buying time frame. Get started now by downloading our free homebuying guide.

Related: How Much Does It Truly Cost to Maintain a Home?

Ready to save for that down payment? Here are three ideas to get you started.

1. Learn About Mortgage Types and Down Payment Requirements

This is easier said than done since the minimum amount you will need (or want) to put down will depend on the type of mortgage you get.

With a conventional mortgage, buyers typically must put at least 3-5% down. So, if you purchase a home for $350,000, your down payment would be between $10,500 and $17,500. However, with conventional mortgages (backed by Fannie Mae or Freddie Mac) private mortgage insurance (PMI) is required to protect the lender when the down payment is less than 20% of the home’s value, which means you will pay an extra amount for PMI each month as part of your mortgage payment.

FHA loans allow buyers to put as little as 3.5% down but will also need to pay a mortgage insurance premium or MIP. MIP is both an upfront premium and an annual premium. You’ll need to include that upfront payment in your savings plan.

Government-backed loans from the VA and USDA let you purchase a home with zero down. But to lock in a better interest rate and start building equity right away, you might want to put some money down.

While a VA Home Loan does not require a down payment, or require private mortgage insurance (PMI) if your equity is less than 20%, they do have a funding fee based on the total amount of your loan and is expressed as a percentage of your total loan amount. (See VA’s funding fee charts for clarification.)

Your AMS Military Mortgage Advisor can help you determine which loan type is best for you and how much you may want to put down. Setting that money aside will take some willpower and a budget.

2. Set a Realistic Timeline

Putting 20% down is a great goal, but it’s going to extend the timeline for many buyers by years. For that reason, many buyers opt to put down less — say five or ten percent — and then create a budget to help them set enough aside to buy in a year or two.

A budget helps you track your income and expenses so you can make better financial decisions. If you want to save $10,000 in one year, that would mean putting away about $800 a month. If that’s not doable for you, consider lengthening your savings time to two or even three years.

Before committing to your timeline, make sure you’ll be saving enough for household maintenance and repairs (estimate 1-2% of the purchase price per year for this), an emergency fund to cover living expenses for six to 12 months, and other unexpected costs like a major car repair or uncovered medical expenses.

When you’re satisfied, consider setting up automatic withdrawals from each paycheck or pension payment you receive to go into your down payment fund. Also, bank any “windfalls” that come your way, such as income-tax refunds, gifts or bonuses. Every dollar you can add will put you closer to your savings goal.

Finally, it’s important to review your down payment savings timeline frequently and make adjustments if needed. Could you be putting more into savings each month? Is your current plan too burdensome? Your down payment goal and timeline should be flexible enough that you can continue and not give up.

3. Ask Your Lender About Down Payment Assistance

Down payment assistance (DPA) is available nationwide and often can be used with VA, conventional, FHA or USDA financing (be sure to ask your lender if you can use funds from a DPA program).

DPA is typically a grant or loan offered by nonprofits and government agencies, including the U.S. Department of Housing and Urban Development (HUD), and local and state housing authorities. Most programs determine the applicant’s eligibility by household income and their credit history. Some programs are restricted to first-time buyers, although this requirement is often waived for servicemembers.

Interestingly, many programs target members of the military and Veterans. According to Down Payment Resource (DPR) as of November 2023, 61 programs offering $2,000 to $120,000 in assistance were available to help servicemembers build, buy or make accessibility-related home renovations. (Of course, servicemembers and Veterans can also apply to the 2,200+ DPA programs maintained monthly in DPR’s database.)

We’re Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!