The short answer
- You don’t need 20% down, but it changes the cost. In the US, a conventional loan with less than 20% down usually requires private mortgage insurance (PMI). FHA loans allow 3.5% down with a credit score of 580 or more.
- Real buyers put down less than you think. The median first-time buyer down payment was 10% in NAR’s 2025 survey; repeat buyers put down 23%.
- Budget beyond the deposit. US closing costs typically run 2% to 5% of the price (CFPB). In England and Northern Ireland, first-time buyers pay no stamp duty up to £300,000.
- The plan: (total cash needed − what you’ve already saved) ÷ months to purchase = monthly target. Keep your emergency fund separate.
This article is general information, not personal financial or mortgage advice. In the US, a HUD-approved housing counselor can review your situation for free or at low cost; in the UK, talk to a regulated mortgage adviser.
How much cash you actually need
Most people save for “the down payment”. The cash you need on closing day is bigger:
- The down payment or deposit, a percentage of the price.
- Closing costs: lender fees, title, appraisal, legal work. The CFPB says they typically range from 2% to 5% of the purchase price, not counting the down payment.
- Taxes on the purchase in some places, such as Stamp Duty Land Tax in England and Northern Ireland.
- Moving, basic furniture and first repairs.
On top of that, the CFPB suggests keeping an emergency cushion of at least three to six months’ expenses before working out how much you can put down. A new homeowner with zero savings is one broken boiler away from a credit card balance. The emergency fund guide covers how to size it.
The US rules: 20%, PMI and FHA
The 20% line. With a conventional loan, the CFPB explains that you may be required to buy private mortgage insurance if your down payment is under 20%. PMI protects the lender, not you, and it adds to your monthly cost. Under the Homeowners Protection Act, you can ask to cancel it once your loan balance reaches 80% of the home’s original value, and it ends automatically when the balance is scheduled to reach 78%, provided you’re current on payments.
FHA loans. Loans insured by the Federal Housing Administration require a minimum down payment of 3.5% with a credit score of 580 or higher, and 10% with a score between 500 and 579. The down payment can come from a gift from family, an employer or a charity. FHA loans carry their own mortgage insurance premiums, so a low down payment still has a cost.
What real buyers do. NAR’s 2025 Profile of Home Buyers and Sellers surveyed people who bought a primary residence between July 2024 and June 2025 (6,103 responses). First-time buyers made up just 21% of buyers, the lowest share since NAR began tracking in 1981, and their median down payment was 10%, the highest since 1989. The survey is run by a real estate trade group and had a 3.5% response rate, so treat it as a useful snapshot, not a census.
The CFPB also notes that down payment assistance exists for some groups, including veterans and service members, rural residents and some first-time buyers. A housing counselor can tell you what applies where you live.
The UK rules: Lifetime ISA, stamp duty and 5% deposits
Lifetime ISA (LISA). GOV.UK sets out the rules:
- You must be 18 or over but under 40 to open one.
- You can pay in up to £4,000 a year until you’re 50, and the government adds a 25% bonus, up to £1,000 a year. It counts towards your £20,000 annual ISA allowance.
- To use it for a first home, the property must cost £450,000 or less, you must buy at least 12 months after your first payment, and a conveyancer or solicitor must act for you.
- Withdrawing for any other reason (except being 60 or over, or terminally ill) costs a 25% charge. That takes back more than the bonus: £1,000 of your own money plus a £250 bonus is £1,250, and 25% of that is £312.50, leaving you £937.50.
The government consulted in summer 2026 on a new, simpler First Time Buyer ISA to replace the LISA, with the bonus paid when you buy and no withdrawal charge. Until it launches, you can still open a LISA, and existing holders can keep saving under the current rules. Check GOV.UK for the latest before you open an account.
Stamp duty. Since 1 April 2025, first-time buyers in England and Northern Ireland pay no Stamp Duty Land Tax up to £300,000 and 5% on the portion from £300,001 to £500,000. Above £500,000, the relief doesn’t apply. Scotland and Wales have their own taxes with different rules.
Low-deposit mortgages. The government’s Mortgage Guarantee Scheme, made permanent in July 2025, backs participating lenders offering mortgages with deposits as small as 5% (91% to 95% loan-to-value).
A worked US plan
Tomás and Aisha in Columbus aim to buy a $350,000 house in 36 months. They already have $8,000 set aside for it, separate from their emergency fund. Assumption: closing costs at 3% of the price ($10,500), within the CFPB’s 2% to 5% range.
| Down payment | Down payment amount | Plus closing costs | Minus savings | Per month over 36 months |
|---|---|---|---|---|
| 3.5% (FHA minimum) | $12,250 | $22,750 | $14,750 | $409.72 |
| 10% (first-time buyer median) | $35,000 | $45,500 | $37,500 | $1,041.67 |
| 20% (no PMI on a conventional loan) | $70,000 | $80,500 | $72,500 | $2,013.89 |
3.5% (FHA minimum)
Down payment amount$12,250
Plus closing costs$22,750
Minus savings$14,750
Per month over 36 months$409.72
10% (first-time buyer median)
Down payment amount$35,000
Plus closing costs$45,500
Minus savings$37,500
Per month over 36 months$1,041.67
20% (no PMI on a conventional loan)
Down payment amount$70,000
Plus closing costs$80,500
Minus savings$72,500
Per month over 36 months$2,013.89
The jump from 10% to 20% nearly doubles the monthly effort. The trade-off is PMI and a bigger loan on one side, a later purchase date on the other. Neither is right for everyone; the table just makes the choice visible.
If $1,041.67 is too much, there are three levers: stretch the timeline (48 months brings the 10% plan to $781.25), aim for a lower price, or put windfalls such as tax refunds straight into the fund. A $2,400 refund covers more than two months of the 10% plan.
A worked UK plan
Chloe, 29, in Bristol, wants a £280,000 flat in 36 months with a 10% deposit. She has £5,000 saved.
- Deposit: 10% × £280,000 = £28,000.
- Stamp duty: £0 with first-time buyer relief. Without it, she’d pay 2% on £125,001 to £250,000 (£2,500) plus 5% on £250,001 to £280,000 (£1,500), so £4,000.
- Legal fees, survey and moving: £3,000 (assumption).
- Total cash needed: £31,000.
| With a Lifetime ISA | Without | |
|---|---|---|
| LISA payments (£4,000 a year × 3) | £12,000 | £0 |
| Government bonus (25%) | £3,000 | £0 |
| Still to find after savings of £5,000 | £11,000 | £26,000 |
| Regular savings per month | £305.56 | £722.22 |
| LISA payments per month | £333.33 | £0 |
| Total per month | £638.89 | £722.22 |
LISA payments (£4,000 a year × 3)
With a Lifetime ISA£12,000
Without£0
Government bonus (25%)
With a Lifetime ISA£3,000
Without£0
Still to find after savings of £5,000
With a Lifetime ISA£11,000
Without£26,000
Regular savings per month
With a Lifetime ISA£305.56
Without£722.22
LISA payments per month
With a Lifetime ISA£333.33
Without£0
Total per month
With a Lifetime ISA£638.89
Without£722.22
The bonus saves her £83.33 a month (£3,000 ÷ 36). She must open the LISA at least 12 months before buying, and the flat must stay under £450,000. The figures ignore interest and assume she pays in the full £4,000 in each of three tax years.
- 1Price the whole purchaseDeposit, closing costs or stamp duty, legal fees, moving. Use your own quotes where you can.
- 2Protect the emergency fundIt stays separate. It is not part of the deposit.
- 3Do the divisionCash needed − savings already set aside ÷ months to purchase = monthly target.
- 4Automate itA transfer on payday into a separate, insured savings account, or a LISA if you qualify.
- 5Review every quarterAdd windfalls, check progress, move the date if prices or income change.
Where to keep a house fund
This guide doesn’t recommend products. Two principles appear in most official guidance:
- Keep it safe and reachable. Money you’ll need within a few years is exposed if its value can fall just before you buy. Insured savings accounts are covered up to $250,000 per depositor, per bank, per ownership category by the FDIC in the US, and up to £120,000 per person, per authorised institution by the FSCS in the UK.
- Keep it separate. A dedicated account makes the goal visible and harder to dip into.
For a first budget to find the monthly amount, see how to make a monthly budget and how much to save each month.
Saving for it together
Aisha and I put $1,050 into the house fund this month
Ready: +$1,050 to the shared goal “House fund”. You’re at $9,050 of $45,500, 20%. Save it?
Each of you can log deposits from your own phone.
Try Binome360 for freeIn Binome360, a savings goal has a name, an amount, a date and a progress bar. It can be personal or shared in a joint assistant, and each person logs deposits in one sentence, typed or spoken. Nothing is saved until you confirm. The app doesn’t connect to your bank, never moves money and doesn’t give investment or mortgage advice: it keeps the tally and reminds you each month. Our couples budget guide covers ways to split the effort.
Frequently asked questions
How much should I save for a house?
Add up the down payment you’re aiming for, closing costs (typically 2% to 5% of the price in the US) or stamp duty and fees in the UK, and moving costs. Subtract what you have, then divide by the months until you want to buy. Keep your emergency fund on top.
Do I really need 20% down?
No. FHA loans allow 3.5% with a credit score of 580 or more, and first-time buyers put down a median of 10% in NAR’s 2025 survey. Below 20% on a conventional loan, you’ll usually pay PMI until you reach enough equity.
How long does it take to save for a down payment?
Divide the amount you still need by what you can save each month. $37,500 at $1,041.67 a month takes 36 months; at $781.25, 48 months. Windfalls shorten it.
Is a Lifetime ISA worth it for a first home?
It adds 25% to up to £4,000 a year, which is a large bonus. The limits matter: you must be under 40 to open one, buy at least 12 months after your first payment, and stay under £450,000, and taking the money out for another reason costs 25%. A regulated adviser can help you weigh it against your plans.
Can I use my retirement savings for a down payment?
NAR’s 2025 survey found that 26% of first-time buyers used financial assets for their down payment. Tapping retirement accounts can trigger taxes, penalties or loan repayments, and it shrinks your future pot. Get professional advice before doing it.
In short
The cash you need is the deposit plus closing costs, taxes and moving, with the emergency fund kept separate. In the US, 20% avoids PMI but 10% is the first-time median and 3.5% is the FHA floor; in the UK, the LISA bonus and first-time buyer stamp duty relief can cut the total noticeably. First action: price the whole purchase, subtract what you have, divide by the months left, and set up the transfer on your next payday.
Sources
- National Association of REALTORS®, 2025 Profile of Home Buyers and Sellers (highlights), November 2025: nar.realtor.
- NAR, “Top 10 Takeaways from NAR’s 2025 Profile of Home Buyers and Sellers”, 3 November 2025: nar.realtor.
- Consumer Financial Protection Bureau, “Determine your down payment”: consumerfinance.gov.
- Consumer Financial Protection Bureau, “What is private mortgage insurance?”: consumerfinance.gov.
- CFPB, “Homeowners Protection Act (PMI Cancellation Act)” examination procedures, 2012: files.consumerfinance.gov.
- U.S. Department of Housing and Urban Development, “What is the minimum down payment requirement for FHA?” and “Does FHA require a minimum credit score?”: answers.hud.gov.
- GOV.UK, “Lifetime ISA” (overview, eligibility, buying your first home, withdrawals): gov.uk/lifetime-isa.
- HM Treasury, “First Time Buyer ISA: Consultation”, June 2026: gov.uk.
- GOV.UK, “Stamp Duty Land Tax: residential property rates”: gov.uk.
- HM Treasury, “2025 Mortgage Guarantee Scheme”, July 2025: gov.uk.
- FDIC, “Deposit insurance at a glance”: fdic.gov; FSCS, “Deposit limit”: fscs.org.uk.
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