The internet is full of good and bad advice on how to save for a down payment. Fortunately, there are several tried and true ways to achieve your goal after you’ve determined how much you need.
Set aside a little extra each month
Automate what you set aside into a separate savings account, so it becomes part of your monthly spending, said Nika Farb, a certified financial education instructor.
Your money will grow faster in a high-rate savings account. The average savings account pays less than 0.5%, according to the Federal Deposit Insurance Corp. The rate for a high-yield savings account can be 10 to 20 times higher, according to First Fed, a community bank in Washington state. High-interest accounts may have limitations, such as a minimum deposit amount, so research your best options.
Paying off credit cards is another way to save money in the long run. Credit cards charge customers for the right to pay off a debt, and that interest can balloon. Paying off your cards also shows lenders that you handle your debts, and it can boost your credit score, which will play a key role in your mortgage application later on.
Choose the strategy that works best for you. Some financial professionals advise paying off the card with the highest interest rate. This is known as "the avalanche method" because it saves the most on interest payments. Others favor "the snowball method." Using this approach, you pay off the card with the smallest debt as a quick motivator, and then apply the money you were paying on that debt to the next largest, and so on.
Another hack is setting aside more as part of your monthly rent. Determine how much you can afford for a mortgage, subtract your rent and save the difference in a savings account. It's a good barometer of whether your projected monthly mortgage payment is doable.
Cut expenses
Resisting the urge to splurge is imperative. A 2025 SoFi survey indicated that 92% of homebuyers changed their money habits to save for a home, with 49% spending less on nonessentials. Eating out less, bringing your lunch to work, brewing coffee at home, and choosing to "staycation" can add up.
Online coupons are also a handy way to slim down a budget. Some manufacturers offer money-saving discount codes on their websites.
Get a second gig
Cutting several hundred dollars a month from a tight budget can be a stretch for some. Working more hours, getting a raise or finding a better-paying job are faster ways to meet your goals, but so is getting a second job. In Bank of America's 2025 Homebuyer Insights Report, 30% of Gen Z homebuyers who responded to the survey took on a second job to save for a down payment, up from 24% in 2023.
Solicit help from others
In that Bank of America report, 15% of all homebuyers relied on loans from relatives. The number was even higher for Gen Z: 20%.
A loan can come with the stress of owing something to the giver. That's why some choose to simply gift the money.
Gifts can carry tax consequences for the donor, but generally not for the person getting the funds. A donor must report gifts over $19,000 to the Internal Revenue Service, said Ryan Dossey, a San Diego-based real estate investor. Lenders may ask the donor for a letter documenting the gift, he said.
Borrow from your 401(k)
While cashing out a retirement account carries penalties, a loan does not. The federal government allows taxpayers to withdraw half of their 401(k) account for a home down payment, up to $50,000. This strategy carries risks: Borrowers will have less for retirement because they will not accumulate gains on the withdrawn funds. Borrowers may have to repay the entire loan if they lose their job, and withdrawn funds must be included in personal income, possibly affecting the borrowers' debt-to-income ratio. If borrowers fail to repay, the Internal Revenue Service treats the loan as a distribution and charges a 10% penalty.