Saving for a down payment can feel like a monumental task, especially for first-time homebuyers. However, with the right strategy and a bit of determination, it’s definitely achievable. Whether you’re dreaming of a cozy cottage or a spacious family home, the journey to homeownership starts with the first step — saving for a down payment. Let’s explore some smart strategies to help you get there.

Understanding how much you need to save is crucial. The myth that you always need a 20% down payment is just that — a myth. While a larger down payment can save you on private mortgage insurance and potentially secure better mortgage rates, many types of loans require far less upfront. For instance, conventional loans can require as little as 3%, and FHA loans only 3.5%. Veterans and those eligible for USDA loans might not need a down payment at all. Knowing the requirements of different loan types can help you set a realistic savings goal tailored to your financial situation and the home you’re eyeing.

Beyond the down payment, don’t forget about closing costs, moving expenses, and the all-important emergency fund for unexpected repairs. These can add to the upfront cost of buying a home, so include them in your savings plan. It’s about finding a balance between what you can afford to put down and keeping enough in reserve for the other costs of home buying and ongoing homeownership.

To build up your down payment fund, consider automating your savings. This takes the thought process out of the equation and helps you consistently save without the temptation to spend. If you receive any windfalls, like tax returns or bonuses, funnel those into your savings too. Tools like high-yield savings accounts and money market accounts offer safe, accessible places for your money to grow while you’re saving.

Another area to focus on is your spending habits. Small changes can add up over time, so examine your monthly bills and discretionary spending for savings opportunities. Perhaps you can cut back on dining out, renegotiate your cable or cellphone plan, or even downsize your current living situation to save on rent. All these savings can be redirected into your down payment fund.

Choosing the right savings account is key. High-yield savings accounts and money market accounts are excellent for short- to midterm financial goals like a down payment because they offer higher interest rates than regular savings accounts. For those with a longer timeline, certificates of deposit (CDs) might be worth considering, as they generally offer even higher interest rates in exchange for locking in your money for a set period.

Investing your down payment savings in the stock market is generally not advised unless your home purchase timeline is very flexible. Market volatility can put your down payment at risk. Instead, opt for these safer accounts where your money can grow steadily and be available when you need it.

It can be tempting to dip into other savings, like your emergency fund or retirement accounts, but resist the urge. Your emergency fund is a safety net for unexpected expenses, not a source for a down payment. Similarly, while borrowing from a 401(k) or making an early withdrawal from an IRA might seem like easy money, it can seriously hinder your long-term financial health and retirement readiness.

If you’re finding it difficult to save enough, don’t overlook down payment assistance programs. Many state and local governments offer programs to help first-time buyers with down payments and closing costs. Additionally, financial gifts from family can significantly boost your savings, provided you document the gift properly for your lender.

With a strategic approach, patience, and a bit of discipline, saving for a down payment is within your reach. Starting early, making informed decisions, and leveraging available resources can make all the difference. Remember, every little bit saved gets you one step closer to holding the keys to your new home.