Buying a house today is no joke. Home prices have surged over 30% in the last four years and today the median cost of a new home is $412,300. Coming up with a down payment is no longer an easy matter.

The National Association of Realtors says the typical down payment for firs-time homebuyers is 8%, meaning you could need as much as $32,984 on the average home cost. No wonder so many young people think the chance to grab a piece of the American Dream is beyond their means. It is why they are renting or choosing a nomadic van life instead.

Which is why I thought this Reddit discussion about strategies for saving for a down payment was provocative. On the r/AskOldPeopleAdvice subreddit, Positive_Comb_5734 marveled that more young people don’t live with their parents for a year or two after college and save all of their income towards buying a house. The Redditor notes people will go off on their own and save for 10 to 15 years for a down payment when they could do it much sooner by moving back home. It also has the benefit of helping you to achieve early retirement that much sooner. 

When it comes to saving money, would-be homeowners need to pull out all the stops to put enough cash aside. But is living with your parents the solution?

24/7 Wall St. Insights:

• Considering the average cost of a new home purchase, recent college graduates need to consider every option for saving for a down payment.
• Moving back in with your parents for a year or two to save on rent is a viable option to consider, but it is not a cost-free solution.
• Young, wannabe homebuyers need to have a conversation at the start to set expectations on what is expected from everyone.

Cracking the big housing nut

The simple answer is yes. While Positive_Comb_5734 acknowledges there are exceptions, such as the case with having abusive parents, for everyone else it is a viable option for saving money. In fact, it could be one of the best ways to do it. After yourself, no one is going to look after you the way your parents do. 

There are caveats, of course. The suggestion that you can squirrel away all your income for a down payment might not be practical. You will likely need to contribute at least something towards household expenses. Everything costs more today, including for your parents, so it shouldn’t be expected to live completely live rent-free. While you won’t pay as much in rent elsewhere, contributing something is important.

So long as you’re diligent about putting the difference into some sort of savings vehicle like a high-yield savings account, you can sock away a lot of cash towards your down payment.

Yet maintaining focus on the goal is essential. You will also need to cut out other unnecessary expenses. Going out with friends shouldn’t be a priority, nor buying luxuries like the latest electronic gadgets and video games. You have moved back in with your parents for a reason and it’s not just to have your mom cook dinner for you and wash your laundry again.

Setting ground rules

There are other things to consider too. Can you emotionally and mentally live with your parents again. Even if they aren’t abusive, can you live by the rules of their house again? After being independent in college, having your parents ask where you’re going, when you will be back, and it’s time to eat dinner could be jarring.

It’s best to communicate with them beforehand to discuss expectations about living arrangements, contributions to household expenses, and having a timeline for moving out again.

What will it cost?

You will also need to consider what your local housing market is like and how much you will need for a down payment. While saving money every month will go a long way towards cracking that housing nut, is one to two years enough? 

Home prices rise about 5% annually, but just using the $33,000 national average down payment figure, that requires squirreling away $1,375 to $2,750 a month depending on whether it was two years you lived with your parents, or just 12 months. Understand also, with only an 8% down payment, private mortgage insurance (PMI) will likely be added to your monthly mortgage payment.

So moving back in with your parents after college to save up to buy a house is an excellent idea. Just remember it’s not likely going to be the same as when you were in high school and you will have many responsibilities and obligations to fulfil, too.

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