Kmatta/ Getty Images; Illustration by Austin Courregé/Bankrate
For prospective homebuyers, times are tough. Home prices are at record levels, and mortgage rates remain higher than they were in recent years, squeezing those hoping to buy.
It’s probably no surprise, then, that fully 81 percent of aspiring homeowners say down payment and closing costs pose a “very significant” or “somewhat significant” obstacle to owning a home, according to Bankrate’s 2025 Down Payment Survey.
In particular, many Americans feel like the goal of saving for a home has been crowded out by other financial needs, such as stashing away emergency savings, paying down student loans, covering childcare or simply making ends meet. The latter has been especially impacted by inflation and growing levels of debt.
Why is it so hard to save for a down payment right now?
The rent’s too high
Soaring rents have made it difficult for many renters to both cover their living costs and save for a down payment. The typical asking rent nationwide was $1,968 as of January 2025, according to Zillow. Back in 2021, the typical rent was $1,493. That amounts to a 32 percent cumulative increase in four years.
Gina Williams, a recent homebuyer of a townhome in Florida, says she felt compelled to buy after her rent rose significantly during the pandemic.
“I loved to rent,” Williams says, “but they raised my rent three times in the last three years. It squeezed every last dollar out of me.”
Williams says she was able to buy in large part because of a generous down payment assistance package that provided her $100,000 for her home purchase.
You’re fighting the overall price increases
Inflation has calmed down over the past couple of years, but it’s still stubbornly high. In January 2025, the official annual rate of inflation was 3 percent, well above the Federal Reserve’s target of 2 percent. From January 2021 to then, cumulative inflation was 21.5 percent.
Consumers are feeling the squeeze everywhere, including at grocery stores, restaurants, stores and auto dealers. For prospective homebuyers, trying to save for a down payment while also coping with ever-rising prices creates a double whammy.
You have credit card debt
Americans’ credit card balances stood at a collective $1.2 trillion at the end of 2024, up $45 billion from three months earlier, according to the Federal Reserve Bank of New York. Considering that average interest rates on credit card balances are north of 20 percent, carrying a balance can pose a major drag on your finances.
Those student loans are a priority again
Americans owed $1.6 trillion in student debt at the end of 2024, per the New York Fed. While the Biden administration issued student loan forgiveness plans, President Donald Trump has generally opposed wiping away student debt. As a result, many borrowers who had been hoping for forgiveness remain on the hook for their student loan balances.
What’s more, student loan delinquencies once again are showing up on credit reports. During the pandemic, borrowers could skip payments without suffering a hit to their credit scores. That’s no longer the case, which means if you want to qualify for a mortgage, you’ll need to get back on track with student loan payments.
Tips to reprioritize down payment savings
- Be strategic about where you save. If your down payment is languishing in an account with a near-zero interest rate, think about moving your money to a high-yield savings account, a money market account or a certificate of deposit (CD). Consider setting up automated deposits, too.
- Look for ways to grow your income. More than one-third (36 percent) of Americans have a side hustle that earns them extra money beyond their main income source, according to Bankrate’s 2024 Side Hustles Survey. Another backdoor way to “grow” your income: Cut unnecessary expenses and set those savings aside.
- Don’t pass up down payment assistance and gifts. Depending on your income, you might be eligible for down payment assistance through your state’s housing finance agency, your bank or a nonprofit. The assistance might be a grant that doesn’t have to be repaid or a deferred-payment or forgivable loan. Likewise, if your family is in a position to help, consider asking for a down payment gift. Fifteen percent of current homeowners received a gift from family or friends to help with the down payment and closing costs on their first home purchase, according to our Down Payment Survey
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