Owning a home remains an important part of the American Dream for many people. But homeownership isn’t the reality for a lot of Americans. According to a recent report, a greater percentage of people rent today than they did over the past 50 years. The report notes that the majority of Americans under 35 (65%) are renting. It also reveals that rental rates among 35-44-year-olds have increased significantly since 2006.1

So how can you get there? While many things can affect your choice to rent or own, one of the biggest hurdles to homeownership is usually financial. If you’re a renter looking to become a homeowner, it’s a good idea to build your down payment nest egg now, and set it up to grow.

How much to save?

It’s generally recommended that you put a 20% down payment on a home. This can help lock in a lower monthly mortgage payment. It can also save money on interest and insurance in the long run.2

Accumulating the money to cover a 20% down payment, however, requires some planning that doesn’t stop with putting money aside each paycheck. Depending on how soon you plan to buy, you’ll want to make sure you have access to your money when you need it. You’ll also reach your goal faster if your savings can grow along the way. Here are some ways to pick up the pace.

Direct your dollars into a money market account or high-interest savings account.

Finding a place to park your short-term savings and earn a decent return is particularly challenging if interest rates are at historic lows. It’s worth searching for accounts that offer higher-than-average interest rates — which can keep your money working harder for you. Plus, with these types of accounts, your money will still be accessible to you when you need it.

If your homeownership runway is a little longer, consider a certificate of deposit (CD).

CDs are savings certificates with a fixed interest rate and maturity date. These conservative investments can be suitable if you won’t need access to your funds until after the maturity date, which can be three to five years. Keep in mind that there are penalties for early withdrawal — so choose your timeframe and terms wisely.

Investing your money in the stock market could also be a good option.

Keep in mind, however, that stocks are riskier than CDs, money market accounts, or other high-interest savings accounts. You might make more money if you put your dollars into the stock market — but you could lose a good amount, too. You’ll also want to consider the tax implications of investing if you don’t expect to keep your money in the market very long.

Homeownership is a major life step and accumulating enough savings to make it happen can be a tall order. Taking a strategic approach to how and where you save, however, can help turn your homeownership dream into a reality.


1 More U.S. households are renting than at any point in 50 years. Pew Research Center. Retrieved on July 24, 2017 from https://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-households-are-renting-than-at-any-point-in-50-years/.
2 Why is 20% ideal for a down payment? Zillow.com. Retrieved on July 24, 2017 from https://www.zillow.com/mortgage-learning/20-percent-down-payment/.