Quick answer
On a $360,000 home near the US median value, you need about $23,400 with 3% down or $84,600 with 20% down, counting closing costs at the middle of the CFPB’s 2%–5% range. Saving $1,000 a month, the 5% target of $30,600 takes about 31 months, so many buyers combine savings with a low-down-payment loan, assistance, a family gift or a penalty-free IRA withdrawal of up to $10,000.
Key facts
$360,600
US median home value
US Census Bureau, American Community Survey 2024 1-year · 2024 ACS 1-year
$19,000
Annual gift tax exclusion per recipient (2026)
IRS: What's new — Estate and gift tax · Tax year 2026
How much you need to save
Three pots of money: the down payment, closing costs — which the CFPB puts at 2%–5% of the purchase price, on top of the down payment — and a cash cushion you keep after closing.
| Down payment | Down payment amount | Closing costs (2%–5%) | Cash to close |
|---|---|---|---|
| 3% | $10,800 | $7,200–$18,000 | $18,000–$28,800 |
| 5% | $18,000 | $7,200–$18,000 | $25,200–$36,000 |
| 10% | $36,000 | $7,200–$18,000 | $43,200–$54,000 |
| 20% | $72,000 | $7,200–$18,000 | $79,200–$90,000 |
Twenty percent is not a requirement. Conventional loans start at 3% down, FHA at 3.5% and VA and USDA at 0% for eligible buyers. Putting down less means paying mortgage insurance and a bigger monthly payment, so the right target is the one that leaves you a payment you can carry — the affordability calculator shows both.
How long it will take
| Target | $500/mo | $1,000/mo | $1,500/mo | $2,000/mo |
|---|---|---|---|---|
| 3% down ($23,400) | 47 | 24 | 16 | 12 |
| 5% down ($30,600) | 62 | 31 | 21 | 16 |
| 10% down ($48,600) | 98 | 49 | 33 | 25 |
| 20% down ($84,600) | 170 | 85 | 57 | 43 |
Interest on savings shortens these times a little; rising prices lengthen them. If the 20% row is years away, compare the extra rent you would pay while saving with the cost of PMI on a smaller down payment — the rent vs buy calculator runs that comparison.
Open calculatorKeep a cushion after closing
Don’t put every dollar into the purchase. The CFPB suggests an emergency cushion of usually 3–6 months of expenses. Counting only the housing payment on this home with 10% down — about $2,784 a month — that is $8,352–$16,704, before groceries, car payments and repairs. Lenders also like to see reserves left over after closing, and a few months’ cushion can make a borderline approval stronger.
Where to keep the money
Money you will need within a few years belongs somewhere safe and easy to reach, such as a federally insured savings account, rather than investments that can fall just before you buy. Keep it in your own name and leave a clear paper trail: lenders review your recent bank statements and typically ask you to explain and document large deposits that aren’t from your paycheck.
Using an IRA for a first home
Early withdrawals from an IRA usually carry a 10% additional tax, but IRS Tax Topic 557 lists an exception for up to $10,000 used for a qualified first-time home purchase. The rules that come with it:
- Lifetime limit. $10,000 in total, reduced by any earlier first-home withdrawals.
- IRAs only. The exception doesn’t apply to 401(k) and other workplace plans.
- Definition of first-time. You and your spouse can’t have owned a principal residence in the 2 years before the purchase — a shorter test than most first-time buyer definitions.
- Deadline. The money must be spent on the purchase within 120 days of the withdrawal.
- Income tax still applies. The exception removes only the additional tax; the taxable part of a traditional IRA withdrawal is still income for the year.
Using the IRA exception for a 5% down payment
The 5% target on this home is $30,600. Taking $10,000 from a traditional IRA cuts what you still need to $20,600 and avoids $1,000 of additional tax — but the $10,000 is added to your taxable income, so set aside money for the income tax bill.
Gifts from family
A gift from family can close the gap quickly. On a Fannie Mae loan for a one-unit home you live in, a gift can cover the whole down payment, closing costs and reserves; you aren’t required to put in any of your own money. Acceptable donors include relatives, a fiancé or domestic partner, but not the seller, builder or real estate agent. The donor signs a gift letter stating the amount, their relationship to you and that no repayment is expected.
For the giver, the annual gift tax exclusion is $19,000 per recipient in 2026. A larger gift to one person in a year generally means the giver files a gift tax return. FHA and other loan programs have their own gift rules, so ask your lender before the money moves.
Ways to need less
- Choose a low-down-payment loan. Compare FHA, VA, USDA and conventional options in first-time buyer programs.
- Apply for assistance. State and local down-payment grants and loans can cover the down payment and part of the closing costs.
- Negotiate seller credits. A seller can agree to pay part of your closing costs, within limits set by your loan type.
- Shop closing costs. Compare lender fees on each Loan Estimate and, where allowed, shop for title and settlement services.
Frequently asked questions
How much should I save before buying a house?
Enough for the down payment, closing costs of 2%–5% of the price, and a cushion. On a $360,000 home that is about $23,400 with 3% down or $84,600 with 20% down, using the middle of the closing-cost range.
How long does it take to save for a house?
At $1,000 a month, a 5% down payment plus closing costs on a $360,000 home takes about 31 months; at $2,000 a month, about 16. Assistance programs, gifts and an IRA withdrawal can shorten that.
Can I use my IRA to buy my first home?
Yes. Up to $10,000 over your lifetime can come out without the 10% additional tax if it is used for a first home within 120 days. Regular income tax still applies to the taxable part, and the exception doesn’t cover 401(k) plans.
Can my parents give me money for a down payment?
Yes. Fannie Mae lets a gift from a relative cover the entire down payment and closing costs on a one-unit home you will live in, documented with a signed gift letter. Gifts above $19,000 to one person in a year generally require the giver to file a gift tax return.
Should I wait until I have 20% down?
Not necessarily. Waiting avoids mortgage insurance but means more years of rent and exposure to price changes. Compare the cost of PMI with the cost of waiting, and keep an emergency cushion either way.
How big should my emergency fund be when buying a home?
The CFPB suggests usually 3–6 months of expenses, kept separate from the money you use for the down payment and closing costs.
Sources
- Freddie Mac Primary Mortgage Market Survey — 30-year fixed rate, national weekly average (Week of Oct 29, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- CFPB — Typical closing costs, low end (share of purchase price); Typical closing costs, high end (share of purchase price); CFPB: emergency cushion, low end (months of expenses) (Oct 28, 2026)
- US Census Bureau, American Community Survey 2024 1-year — Effective property tax rate (median taxes ÷ median home value) (2024 ACS 1-year)
- Freddie Mac Research — Average homeowners insurance premium per $1,000 of home value (2023 data)
- Freddie Mac My Home — Typical PMI cost, low end; Typical PMI cost, high end (Oct 28, 2026)
- IRS Tax Topic 557 — Penalty-free IRA withdrawal for a first home (lifetime limit); Additional tax on early IRA distributions unless an exception applies (Oct 26, 2026)
- U.S. Department of Veterans Affairs — VA purchase loan down payment (price at or below appraised value) (Jan 7, 2026)
- 26 U.S.C. 72(t)(8) — IRA first-home exception: no ownership interest in a principal residence in the past; IRA first-home withdrawal must be spent on the purchase within (Oct 28, 2026)
- IRS: What's new — Estate and gift tax — Annual gift tax exclusion per recipient (2026) (Tax year 2026)
- IRS: Exceptions to tax on early distributions
- Fannie Mae Selling Guide B3-4.3-04: Personal gifts
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.