Housing
The Best City to Quickly Save Money for the Down Payment on a Home
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The price of a home in America has skyrocketed recently. Among the reasons are mortgage rates, which have been near historic lows (that has started to change recently). Another reason is that people have moved from expensive coastal cities like New York and Los Angeles to places inland with lower home prices, and overall lower costs of living. Finally, the COVID-19 pandemic has allowed millions of people to permanently work away from their offices.
Depending on income and home prices, down payments vary. A modest number of people qualify for zero down payment mortgages. Most of these have taken out government-backed loans. The lender may take great risks with these because the homeowner starts out with no home equity.
Zillow considered the median renter income in the U.S. as of March 2021 of $3,855 per month and savings of 2.4% of income. Based on these figures, it would take more than 26 years to finance that 20% down payment for a typical starter home priced at $148,527. While you might think that at that rate you might as well save for a retirement home, there are options out there.
Down payment also hinges on where people are searching for a home. To determine the metro area where residents can save for a down payment the fastest, 24/7 Wall St. reviewed the report 2022’s Best Metros Where Renters Can Save Fastest for Their First Home from RentCafe.
In 20 metro areas we considered, the median household income is high enough, and the price of a starter home is reasonable enough that it shortens the time it takes to save for a down payment. It only takes from a bit over three years to just one year to save for a down payment in the metros on the list.
In Bloomington, a city in central Illinois, a starter home is priced at $105,249, and the median two-person income is $91,669. In this metro area, you could move into a home in a mere 12 months — provided you stash away 22% of your income every month.
Here are Bloomington’s details:
> Time needed to save up for a down payment: 1 year, 0 months
> Typical home down payment: $21,050
> Typical starter-home price: $105,249
> Median household income, two-person family: $91,669
> Pct. of income going to savings: 22%
Methodology: To determine the metro areas where residents can save for a down payment the fastest, 24/7 Wall St. reviewed the report 2022’s Best Metros Where Renters Can Save Fastest for Their First Home from RentCafe.
The report determined how long it would take for a couple to save for a down payment based on the metro area’s median income using data from the U.S. Census Bureau’s 2019 American Community Survey, the price of a typical starter home based on data from Zillow, and the percentage of income that can go to savings.
How much each couple could save as a percentage of income was based on the Economic Policy Institute’s Family Budget Calculator (with each metro’s median rent costs from the Census replacing housing costs) and additional spending based on the U.S. Bureau of Labor Statistics – Consumer Expenditure Survey, 2018-2019.
Click here to see all the best cities for quickly saving for a down payment on a new home.
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