Five cities with the shortest time to save a 20% down payment for homeownership

• According to a new RealtyHop report, Detroit has the least "barrier to homeownership" among cities.
• According to the findings, it takes only 2.53 years for would-be buyers in Detroit to come up with a 20% down payment.
• In expensive cities like New York, it may take homebuyers at least a decade to save up for a down payment.

The time it takes to save for a 20% down payment on a home varies depending on your location.

According to a report by RealtyHop, a typical buyer in a pricey area like New York City would need approximately 10.85 years to save $173,000, which is 20% of the median list price of $865,000 for a home.

The "barrier to homeownership" for the top 100 U.S. cities by population was measured by RealtyHop using median list prices from over 1.5 million residential listings and median household income data from the U.S. Census Bureau. The analysis assumes a household saves 20% of its annual gross income and plans to make a 20% down payment.

Inflation breakdown for December 2024 in one chart: More from Personal Finance.

In four years or less, the savings timeline for homeownership is achievable in all five cities with the lowest barriers to entry.

Detroit has the lowest barrier to homeownership, the report found.

In Detroit, a median household income of $39,575 allows potential homebuyers to save $20,000 for a 20% down payment on a $100,000 home in just 2.53 years.

In Cleveland, Ohio, a potential buyer needs 3.55 years to save $27,800, which is 20% of a $139,000 median listing price home.

The top five cities are Baltimore, Buffalo, New York, and Pittsburgh.

Even in cheap cities, there can be savings roadblocks

In a city with less expensive homes, big expenses can still disrupt your down payment savings plan.

According to a report by Zoocasa, a Canadian real estate website and brokerage, buyers with children typically require more time to accumulate a 20% down payment due to expenses such as child care costs.

In Detroit, potential homebuyers with children require approximately 20.3 years to amass a 20% down payment from scratch, according to Zoocasa. On the other hand, homebuyers without children in the area need around 4.2 years to save for a 20% down payment if they start with no prior savings, the report indicates.

Another challenge posed by rising home prices, according to Jacob Channel, an economist at LendingTree, is the potential impact on the housing market.

Saving for a down payment becomes more important when living in expensive real estate, as stated by Channel.

According to RealtyHop, the median list price for homes in Los Angeles is approximately $1.13 million. Los Angeles ranks first among five cities with the greatest obstacles to homeownership, with Irvine, California; Miami; New York City; and Anaheim, California following closely behind.

The most expensive city on the "high barrier" list, Miami, has a real estate price of $699,000, which is nearly three times the price of the cheapest real estate on the "low barrier" list, Pittsburgh.

To achieve a 20% down payment on a typical LA home, a household would need to save $1,339 per month for approximately 14.10 years, according to a report.

Why you might not need to put 20% down

A down payment of 20% is not always necessary to purchase a home.

In the third quarter of 2024, the average down payment was 14.5% and the median amount was $30,300, according to Realtor.com data. This is a decrease from the second quarter of 2024, where the average down payment was 14.9% and the median amount was $32,700, as found by the site.

Some mortgages, such as VA loans and USDA loans, allow buyers to put down as little as 0% and aim to help those who qualify purchase homes in specific areas.

Qualifying borrowers, such as first-time buyers, low- and moderate-income buyers, and buyers from minority groups, can obtain Federal Housing Administration loans with as little as 3.5% down payment.

Experts suggest that a smaller down payment allows you to become a homeowner faster, with less money saved up.

If you opt for a smaller down payment when purchasing a home, you may face higher monthly mortgage payments.

A larger loan will result if you allocate less funds towards the down payment, as stated by Channel.

When the buyer pays less than 20% down on the home, private mortgage insurance is typically added to the monthly cost, according to him.

The cost of private mortgage insurance (PMI) can range from 0.5% to 1.5% of the loan amount annually, based on factors such as credit score and down payment, according to The Mortgage Reports. For instance, on a $300,000 loan, PMI premiums could amount to $1,500 to $4,500 per year or $125 to $375 per month, as the site determined.

Another type of payment that could be included in your mortgage and increase your housing expenses is what Channel mentioned.

How to come up with your own savings timeline

Determining your long-term living location and financial circumstances can aid in establishing your down payment savings plan, as advised by Melissa Cohn, regional vice president at William Raveis Mortgage.

Cohn advised that in order to have a good household budget, it is important to understand your monthly income, expenses, and savings.

She suggested cutting back on spending, increasing savings, and saving bonuses every year.

Cohn advised that it is crucial for a buyer to determine the price range that would be suitable for them.

Cohn advised that in addition to saving for closing costs, which can significantly differ depending on the location, it's important to consider other expenses.

According to NerdWallet, the average closing costs for a mortgage can range from 2% to 6% of the loan amount. For a $300,000 mortgage, this would mean that the closing costs could range from $6,000 to $18,000, in addition to the down payment.

To determine typical closing costs in your desired area, consult a mortgage broker or a real estate agent, she advised.

Setting realistic goals and taking the necessary time to achieve them is crucial.

""Take your time or move quickly, but always make informed decisions," advised LendingTree's Channel."