Let's follow a family that started preparing to buy a home in Austin with a budget of $50,000. Initially, they aimed to save for a 20% down payment, but upon realizing that the median home price in downtown Austin is $595,000 (as of 2026), they had to adjust their goal. A 20% down payment would require $119,000, which would take significantly more time to save.

However, when they expanded their search to the entire Austin metro area, the situation changed slightly. The median home price in the Austin metro area is around $440,000 (as of May 2026, down 0.9% from the previous year), which is noticeably lower than in the city center. Applying the FHA loan's minimum down payment requirement of 3.5%, the cash needed drops to $15,400. This requirement applies if the credit score is above 580; if it's between 500 and 579, a 10% down payment is needed.

If saving for a down payment feels overwhelming, it's worth considering the 3% option for conventional loans. First-time homebuyers or those with an income at or below 80% of the area median income can start with 3%, while others typically need around 5%. If the down payment is less than 20%, PMI will be required, but considering the time it takes to save for 20%, it may often be better to enter the market sooner with PMI in mind. The average interest rate for a 30-year fixed mortgage is between 6.55% and 6.72% (Freddie Mac PMMS, as of July 2026).

Texas has no state income tax but has a high property tax burden. The effective tax rate in Travis County, where Austin is located, is about 1.54%, similar to the Texas state average of 1.58%. For a $440,000 home, the annual property tax could exceed $6,000, so it's wise to include property taxes and insurance in the down payment savings plan.

Down payment assistance programs can also help reduce the savings period. The Texas State Affordable Housing Corporation (TSAHC) offers Home Sweet Texas and Homes for Texas Heroes, which provide grants or forgivable loans of 3% to 5% of the loan amount, while the Texas Department of Housing and Community Affairs (TDHCA) offers My First Texas Home, which supports up to 5% of the loan amount at a 0% interest rate. A credit score of 620 or higher is required, and utilizing the Mortgage Credit Certificate (MCC) can allow homeowners to receive a portion of their mortgage interest as a tax credit each year.

This family ultimately chose to lower their down payment goal to 3.5% and apply for the MCC to receive a portion of their mortgage interest as a tax credit each year. Although having a lower down payment means PMI will be added, the amount received from the MCC offsets some of that difference. They opted to enter the market now instead of extending the savings period by a few more years, but this decision may not be suitable for every family and depends on income and savings capacity.

Closing costs are another item to prepare for in advance. Combining appraisal fees, title insurance, and loan origination fees can result in costs between 2% and 5% of the loan amount. This family allocated the remaining cash for closing costs and moving expenses instead of lowering the down payment. Calculating the down payment, closing costs, and reserves after moving together will reveal the total amount actually needed.

Rather than waiting until the down payment is fully saved, getting pre-approved first can help clarify the exact amount needed, aiding in setting savings goals. While school districts can be referenced through GreatSchools ratings, it's advisable to verify the assigned school for the specific address before purchasing. This article does not constitute investment or legal advice, and consulting a professional before making any agreements is recommended.