How to Save for a House: 9 Simple Tips
Many people dream of owning a home, but when it comes to saving for one, the path forward can feel overwhelming or unclear. Whether you’re just starting to set money aside or you want to accelerate your savings, understanding how to save for a house by following these nine tips and strategies can help turn your dream into reality.
- Your down payment and closing costs are two of the biggest expenses involved in buying a home.
- One effective way to boost your savings balance is through automatic deposits.
- Visual reminders of your goal can help you track progress and stay motivated.
1. Understand your savings target
Knowing how much to save for a house is the first step in creating a plan to reach your goal. The amount you’ll need to save depends on various factors, including your loan amount and the type of mortgage you’re getting. When buying a house, there are three main costs to consider:
- Down payment: Your down payment requirement varies by loan type, but the median down payment is about 15% of the home’s purchase price, according to real estate data firm ATTOM. Government-backed loans often require much less cash up front — as low as 0% for VA loans, and as low as 3.5% for FHA loans.
- Closing costs: Before finalizing a home sale, you’ll need to pay closing costs, which typically cost 2% to 6% of the loan amount and may include origination fees, credit score check fees and appraisal fees.
- Moving expenses: The cost to relocate from one place to another depends on the distance and whether you plan to hire a professional moving company or do it yourself. Local, DIY moves are typically the most affordable, while out-of-state moves will require a bigger chunk of savings.
My biggest advice: Save more than you think! Your savings should account for the down payment, home insurance, property taxes and initial repairs or upgrades. For example, you might want to set aside an extra $1,000 to $2,000 in savings to paint the walls or replace old carpet before moving in all your stuff.
2. Try a “bare-bones” budget
A bare-bones budget involves temporarily cutting back on non-essential spending, like vacations or dining out, to make faster progress toward your savings goals. This might look like taking a weekend trip closer to home instead of a week-long international trip. Or it could look like hosting potluck dinners with friends instead of meeting at a restaurant.
We’re not suggesting anything too extreme — simply a few small sacrifices in service of a bigger goal. Start by making a list of all your essential expenses, including rent, utilities, groceries and minimum debt payments. Once you have your bare bones budget number, challenge yourself to live on it for a month. Any money you save can be redirected toward your house fund.
Learn more about different budgeting methods.
3. Choose the right savings account
Since you’re working hard to save money, it’s important to keep it in the right place. Ideally, you want an account that not only keeps your funds safe but also helps them grow. Look for a high-yield savings account or money market account that earns a competitive annual percentage yield (APY). Currently, some of the best high-yield savings account rates are 4.00% APY or higher.
When saving for a home, it’s generally a good idea to keep the funds in a liquid account rather than one that limits withdrawals or charges early withdrawal penalties.
While you’re saving to buy a house, try to put a little money aside in an emergency fund, as well. Homeownership often comes with unexpected expenses, such as a broken appliance or leaky pipe, and having a financial cushion to fall back on — ideally three to six months’ worth of expenses — can help you manage the costs without derailing your budget.
4. Automate your savings
If you find it hard to remember or just don’t get around to transferring money into savings, automation can do the legwork for you. By setting up automatic transfers from your checking account into your savings account, you can build a consistent savings habit without thinking about it. Most banks let you choose the frequency that works best for you — such as weekly, biweekly or monthly. You can also choose the amount you want to save. Even small amounts can add up over time.
5. Earn extra money
Finding ways to boost your income, even temporarily, can significantly accelerate your savings progress. This might mean looking for higher-paying jobs, negotiating a raise or picking up a side hustle. Try getting creative with it — do you have any skills you could monetize? For example, if you enjoy sewing or baking, could you sell items online or at local farmers’ markets? Do you have a spare room you could rent out for extra income? Do you have old items you could sell at a yard sale? Every bit of extra income you earn is one bit closer to your homeownership goal.
Learn more about 20 ways to make extra cash.
6. Explore first-time homebuyer resources
If you’re a first-time homebuyer, you may qualify for down payment assistance, like grants or zero-interest loans, to help you afford a home sooner. Housing finance agencies, nonprofits and some mortgage lenders generally offer these programs. The eligibility requirements will vary, with some programs only available for borrowers who fall under certain income thresholds.
If you’re a teacher or other public servant, additional assistance is available under the Teacher Next Door and Good Neighbor Next Door programs.
Explore down payment assistance programs.
7. Ask for a gift
If you have a family member or friend who is willing to support your homebuying journey, a cash gift can make a meaningful difference. You could also ask for cash toward your house fund in lieu of baby shower or wedding gifts. Keep in mind that there are specific rules regarding using gift money for a home purchase, and a gift letter may be required.
8. Create a visual reminder of your goal
A visual reminder of your goal, such as a photo of your dream home, a vision board or a chart of your savings progress, can help keep it front of mind and serve as a daily nudge to keep you motivated. Try placing the reminder somewhere you’ll see it often, like your fridge or phone lock screen. Visual cues are more than feel-good inspiration — they’re backed by psychology and neuroscience.
9. Assess your progress periodically
If you’re not tracking your goal progress, it can be easy to lose sight of how far you’ve come — or whether you need to adjust your strategy. Regular check-ins help you stay on track and course-correct as needed. This can be as simple as reviewing your savings balance each month, either on your own or with your partner. Remember to celebrate milestones along the way, not just when you reach the finish line.
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