How to Save Up a Home Down Payment in 2023

These moves could put you on the path to homeownership.

If you're looking to buy a home, you'll need more money than usual to pull that off. The reason? Home prices are up on a national level. And while they have the potential to fall next year, they're unlikely to plunge to pre-2020 levels. The U.S. real estate market still lacks inventory in a very big way. And until housing supply picks up, higher prices are likely here to stay.

Meanwhile, it's a good idea to bring a 20% down payment to the table if you're planning to take out a conventional mortgage. If you put down less than 20% of your home's purchase price, you'll be hit with private mortgage insurance (PMI), which is a costly premium that typically gets tacked onto your monthly home loan payments. 

PMI is worth avoiding at a time when you're already looking at spending more on housing payments due to higher-than-average home prices and mortgage rates. So if you're hoping to boost your down payment funds in 2023, here's how.

1. Get on a budget

Following a budget could make it easier to manage your money and find ways to reduce your spending. It pays to set up a budget either on your laptop, on paper, or via an app. Many budgeting apps, in fact, link up to your checking account and credit card accounts so your purchases are tracked automatically, making it easier to see where your money is going. 

2. Reduce a few key expenses

Are there things you're spending money on right now that you can technically do without? If you're hoping to buy a home sooner rather than later, it may be worth giving some of those things up to boost your savings rate. That could mean pledging not to dine out more than once a month in 2023, or sticking to staycations when you have time off from work rather than paying for flights and lodging.

3. Get a side hustle

The gig economy is strong these days, and working a second job could be your ticket to buying a home despite the challenges today's buyers face. The beauty of side hustle earnings is that the money you bring home won't be earmarked for existing expenses. If you're able to earn $100 a week in 2023 after taxes, you'll have a cool $5,000 more to put down on a home by the end of the year.

Don't skimp on a down payment

Many mortgage lenders will let you put less than 20% down on a home. But if you want to avoid PMI, then it pays to aim for 20% -- even if it means having to wait a bit longer to buy.

Also, the more money you're able to put down on your home, the more equity you'll start out with. That's an important thing when you're buying at a time when home prices are elevated. That way, if prices start to fall, you'll be less likely to wind up underwater on your mortgage. 

If you can't manage a 20% down payment on a home given today's prices, you should try to get as close as possible. And these moves could help you close out 2023 with a lot more money to put toward a home purchase.