Where to put your money while you're saving for a house

Saving for a home is one of the biggest — and hardest — financial steps many people will take.

Nationwide, the average down payment is $64,000, according to December 2025 data from Redfin. And while that's down from $70,000 in 2024, it's still a lot to sock away.

Beyond how much you'll need and how to get it, it's important to figure out how long it will take and where to put your money while you work toward your goal.

Most people are laser-focused on the down payment, but there are other up-front costs, as well.

Down payment

The average down payment in December 2025 was about $64,000, according to Redfin, or about 15.5% of the purchase price. That's down $6,000 month-over-month and $1,000 year-over-year.

That should only be taken as a broad guideline — lenders will accept as little as 3% down on a conventional mortgage, there are jumbo mortgages that require up to 30% and government-sponsored loans that don't require anything down.

Closing costs

There are also closing costs, which are up-front one-time fees associated with finalizing the sale. They include lender fees (application, origination, and underwriting fees) as well as the costs of a title search, appraisal, home inspection, escrow account and recording fees (to register the new deed). You'll also have to make your first homeowners insurance, private mortgage insurance and property tax payments.

Closing costs vary by location, lender and loan type, but the national average for mortgage closing costs in 2025 was $4,661, or 1.06% of a home's sale price, according to LodeStar Software Solutions.

Other costs

In addition to moving costs and new furniture, you should set aside cash reserves to cover at least three months of living expenses in case of emergency.

On average, homebuyers need about seven years to save enough for a down payment. In larger, high-demand cities, it can be considerably longer.

Ultimately, how long it takes depends on how large a down payment you're planning to make. Lenders will often accept as little as 3% down on a conventional mortgage, but a smaller down payment means larger monthly payments and more mortgage insurance premiums.

The right vehicle for your house fund depends on how much you need, your timeline, and other factors.

High-yield savings account: Putting cash into a high-yield savings or money market account and it'll earn 10 times or more than a traditional savings or interest-bearing checking account. These accounts are fairly liquid, though, so you'll have to police yourself.

CDs: If you're worried about being tempted to make withdrawals for other reasons, a CD essentially locks away the money until the certificate matures. The downside is that you typically can't add more to a CD once you've opened it. There are add-on CDs that allow savers to contribute additional funds and CD ladders that stagger maturity dates.

First-time homebuyer savings account (FHSA): A growing number of states are helping new homebuyers by backing special savings accounts that can be used for homebuying expenses, such as a down payment or closing costs. Contributions are tax-deductible at the state level, and the interest may also be tax-free or tax-deferred until withdrawal.

Northwest Bank and NBKC participate in individual state FHSAs and Five Star Bank's Home Savings Club has a $3 match for every $1 you save, up to$3,000.

The stock market: While the stock market can offer better returns than savings or CDs, it's also much riskier — especially in the short or medium term. Douglas Boneparth, president of Bone Fide Wealth and co-author of The Millennial Money Fix, advises against investing your housing fund in the market if your timeline is under five years.

"If you have a little more time on your side or are OK with losing some money, you could consider a very low-risk investment portfolio," Boneparth said. "But there's no guarantee."

Once you've pictured your dream home, saving to make it a reality can feel like torture. Here are some ways to speed up the process.

Lower your spending

Cutting back on expenses is always the first step to saving for a large expense — and that means sacrificing. Housing is typically the largest monthly expense, so consider getting roommates, moving to a cheaper place or moving back home (even temporarily).

If there's reliable public transportation, selling your car would not only provide an infusion of cash, but save you money on gas, insurance and maintenance

Look at your dining budget. Are you eating out or ordering in several times a week? Learn the pleasures of cooking and put a cap on restaurants and DoorDash

Increase your savings

Once you've curbed spending, set up automatic transfers from your paycheck or checking account into a dedicated "down payment" account and direct any tax refunds, salary bonuses or cash windfalls there, as well.

Continue contributing enough to your retirement fund to maximize any matching funds from your employer, but it could be worth dialing down your 401 (k) contributions while you focus on saving for a house, especially if you're younger.

Look into increasing your income stream — whether that's taking on a side hustle, asking for a raise or applying for a higher-paying job. Just don't allow lifestyle creep to swallow up your additional cash flow.

Gifts

Most lenders allow gift funds to be used toward purchasing a home, although they'll want to see that you have steady income to make mortgage payments. You'll also need a "gift letter" indicating the money is not expected to be repaid. In addition, the gift can't come from the seller, realtor or other interested party.

In 2026, someone can gift up to $19,000 annually per recipient ($38,000 for married couples splitting gifts) without triggering a gift tax.

Home buyer assistance

There are many local, state and federal programs designed to help borrowers, often for lower-income or underrepresented buyers. Banks also grants and forgivable loans aimed at first-time homebuyers (usually defined as anyone who hasn't bought a house in the last three years).

The Bank of America America's Home Grant offers up to $7,500 toward a down payment for eligible buyers in low- to moderate-income census tracts. Bank of America also has a down payment grant worth 3% of a house's purchase price, up to $10,000, in select markets.

The Chase Homebuyer Grant provides eligible borrowers with up to $7,500 to lower their interest rate, put towards closing costs or bolster their down payment.

It's available to borrowers with a Chase DreaMaker loan or a conventional, FHA or VA mortgage in 15 metro areas, including Atlanta, Chicago, Dallas, Miami, New York and San Diego.

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