How To Save For A House

Are you thinking of buying a home? If you are, you’re likely wondering how to save money for it. Buying a home can be the most significant expense you’ll ever have, with the median U.S. home value at $266,222, according to Zillow. In some places, home prices can be much higher, like four to five times more. For instance, in Los Angeles, the typical home price is around $804,452.

The first step in saving for a house is setting aside money for the down payment. But, when you’re figuring out how much to save for a house, you also need to consider other costs like moving expenses, closing costs, and things you’ll need for your new home.

Because of these additional costs, you’ll likely have to save a significant amount of money. You might be wondering how to do that.

To help you understand how to save money for a house, this article will first guide you on determining the amount of money you need to save. It’s not just about the down payment; there are other expenses to consider too.

Saving money for a down payment is crucial because it affects how much you pay for your mortgage each month. Learning to save for a house is essential, and I’ll share some helpful tips with you.

Buying a house is a significant step, and it’s an exciting time. This article will guide you on how to save for a house, especially if you have a low income, if you’re currently renting, or if you have a couple of years to save. These tips will prepare you so you can concentrate on finding your dream home.

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Related content on how to save for a house:

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6 Important Questions To Ask Yourself Before Buying A Home
Smaller Can Be Better- Maximize Your Savings With A Small House
20 Ways I Saved a 20% Deposit To Purchase My First Investment Property At 20

Contents hide

1 First, how much should I save for a house?

2 How much should I save for a down payment?

3 What are the costs of buying a home?

4 How to save for a house

4.1 1. Set your home buying budget

4.2 2. Create a monthly budget

4.3 3. Pay yourself first

4.4 4. Cut your expenses to save for your home purchase fund

4.5 5. Earn extra money for your house down payment fund

5 6. Find ways to be more motivated

6 7. Save your windfalls

6.1 8. Save for a house with a better bank account

6.2 What is the fastest way to save for a house?

First, how much should I save for a house?

Deciding how much money to save for a house is a personal decision because home prices vary based on where you live and the type of house you want. Everyone has different budgets and financial plans.

Even with these differences, there are certain expenses that every home buyer needs to consider, such as:

Down Payment: This can range from 3% to 100% of the home’s price.
Closing Costs: These include title insurance, home inspection, taxes, and more, and typically amount to about 2% to 5% of the home loan.
Moving Expenses: Costs for things like furniture and transportation during the move.

When creating your budget to save for a house, it’s important to factor in these three costs. Additionally, there are ongoing costs related to living in the house, which we’ll discuss further in the sections below.

No matter your budget for buying the home, always remember to consider the total cost of owning a home.

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How much should I save for a down payment?

Saving more money for a down payment is a smart move because it can make your monthly mortgage payment lower. Different loans have different rules about the minimum amount you need to put down.

For example, with FHA loans, you might only need 3.5% of the home’s price as a down payment. But if your credit score is in the 500 to 570 range, you might have to put down at least 10%.

So, how much you put down depends on a few things:

The terms of your mortgage
Your credit score
Whether you want to pay off your house quickly or not
How much home you can afford

Some people are okay with having a mortgage and are happy with a low-interest rate. Others want to pay off their home fast, and some even pay in cash.

A lot of homeowners try to put down at least 20% on their new home. This is because if you do that, you don’t have to pay for private mortgage insurance (PMI), which could add a couple of hundred dollars to your monthly payment. So, it’s a big decision you’ll need to consider.

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What are the costs of buying a home?

“Living in your own home comes with more expenses than you might expect, especially if you’ve always rented in the past.

So, when you’re thinking about buying a home, it’s crucial to consider all the costs that come with owning one. This can change your perception of what you can actually afford. There are ongoing costs that you might not be aware of.

Understanding these homeownership costs is essential when you’re figuring out how to save for a house. On average, these costs can be around $9,000 per year, depending on where you live.

Ongoing homeownership costs may include:

Property taxes – These can vary a lot based on your location. Similar homes just a few miles apart might have property taxes that differ by thousands of dollars each year.
Electricity/gas – Typically, larger homes mean higher electricity and gas bills.
Sewer – It’s not very expensive, but it’s a bill you’ll need to pay.
Trash – While not super costly, it does add to your expenses.
Water – Your water bill might be a few hundred dollars each month, depending on where you live.
Home insurance – Like everything else, home insurance costs can vary widely based on factors like home value and location. You might also need additional policies for earthquake, flood, or hurricane insurance.
Maintenance and repairs – Whether your home is new or old, you’ll likely have maintenance and repair costs. This includes things like yard upkeep, gutter cleaning, roof repairs or replacement, and fixing or replacing appliances.
Homeowners Association fees (HOA) – These fees can vary quite a bit.”

Remember, being aware of these costs will help you make a more informed decision when you’re planning to buy a home.”

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Learn more at Home Buying Tips You Need To Know Before You Buy.

Now that you’ve read the above, we are going to get down to it – here are 8 tips that will teach you how to save for a house!

1. Set your home buying budget

When you start looking for a house, it’s crucial to figure out how much you can afford. Don’t wait until you’re deep into the home search—set your budget early on.

Your budget helps you know the maximum amount you can be pre-approved for. Your realtor will use this info to find homes within your budget.

There’s no sense in checking out million-dollar homes if your budget is $250,000. It’s not a good idea to go over your budget either. Falling in love with a home you can’t afford can lead to financial stress. Some people try to stretch their budget to buy a dream home, but it can end up costing more than it should.

To set your budget, consider your overall financial situation. Look at:

Your monthly and yearly income.
The money you’ve saved for the down payment and homeownership costs.
Your credit history and score.
The amount you’re comfortable spending on homeownership.
Your total debt.

These factors help determine a realistic home budget.

I don’t recommend relying solely on the bank’s pre-approval amount. Banks often approve higher mortgage amounts than what’s actually affordable. They may not consider all the costs of homeownership. It’s important to set a budget that aligns with your financial situation and comfort level.

2. Create a monthly budget

“Now that you’ve figured out how much you can spend on a home, it’s time to create a simple monthly budget. Don’t worry; it’s not as complicated as it sounds!

To help you save for your down payment, you can use an online savings calculator. These tools ask for details like the home price, your timeline, the amount you’ve already saved, and the down payment percentage. For instance, let’s say you want to buy a $225,000 home in a year, and you’ve saved $5,000 for a 10% down payment. The calculator tells you that you need to save $1,459 each month. This way, you can decide if this fits your budget or if you need to adjust your plans.

Creating a monthly budget is a smart move. It helps you track where your money goes, making it easier to set aside funds for your future home. A budget is like a roadmap for your finances, helping you plan for big expenses, avoid overspending, and identify areas where you can save.

For more tips on budgeting, check out The Complete Budgeting Guide: How To Create A Budget That Works. It’s a great resource to help you manage your money wisely, especially when you’re in the process of buying a house.”

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3. Pay yourself first

To make sure your house fund gets the attention it deserves, a smart move is to pay yourself first.

Here’s a simple plan:

Know Your Finances:
Take a good look at how much you’re saving and spending every month. Track your spending closely, and identify areas where you can cut unnecessary expenses. Figure out the amount you should save for your house each month.
Automate Your Savings:
Make saving for your home automatic. Set a fixed amount to transfer to your savings at the beginning of each month. You can arrange a direct deposit split or schedule a bank transfer. This way, you won’t have to think about it every time.
Start Small, Increase Gradually:
If you’re concerned about having enough money left over each month, start with a small amount for your house fund. As you get used to the routine and your financial situation improves, gradually increase the amount you’re putting aside.

Remember, treating your house fund as a priority means it’s the first “bill” you pay each month.

Making this a habit can have lasting benefits. It not only helps you save for your home but sets a precedent for managing your finances. This approach can be applied to other significant goals like retirement, creating a solid foundation for your financial well-being.

Putting your house fund first becomes a simple and effective financial habit that guides your spending and ensures you’re building towards your dream home.

4. Cut your expenses to save for your home purchase fund

Since your down payment is a significant chunk of cash, you might need to trim some expenses to speed up your savings.

Here’s how you can do it:

Explore alternatives to cable TV: Cable bills can be hefty, averaging over $100 per month. By finding other options, you could save about $1,000 annually.
Shop around for cheaper car insurance: Many folks pay more than they need to for car insurance. Just by comparing prices, you could save hundreds or even thousands of dollars each year. Use a free service for this comparison.
Switch to a more affordable cell phone plan: Look into plans like Republic Wireless, where prices start at just $15 per month.
Consider a cheaper car or no car at all: The average monthly car payment is about $400. Redirecting this money toward your house fund could make a significant difference.
Review your subscription services: Evaluate if you really need all those monthly subscription boxes (meal kits, beauty products, pet treats, etc.). Cut back on what’s not essential.
Utilize the library for entertainment: Save on books, movies, and more by borrowing from the library.
Buy secondhand items: Consider purchasing used items instead of brand new ones to cut costs.
Share expenses with a roommate: If feasible, splitting costs with someone can help you save.

These are just a few ideas. It’s recommended to go through all your expenses and identify areas where you can cut back to boost your savings.

5. Earn extra money for your house down payment fund

Discovering ways to boost your income can fast-track your savings for a new home.

If you’re wondering how to save for a house while renting or on a limited income, increasing your earnings is the most effective strategy. You might have already trimmed your expenses as much as possible, and there’s a limit to what you can do with your current income.

Regardless of your financial goal, earning extra money accelerates your journey to achieving it.

Here are some simple ways to make extra money:

Ask for a Raise: When was the last time you asked for a raise? Now might be the perfect time. Save the extra income for your home fund.
Start a Blog: Join my Free How To Start and Launch A Money-Making Blog Course to kickstart your own blog and potentially generate income.
Join a Focus Group: Participate in focus groups with User Interviews and earn $50 to $100 per hour or more.
Rent out Your RV: If you own an RV, consider renting it out when not in use for some additional cash. Check out How To Make Extra Money By Renting Out Your RV.
Walk Dogs and/or Pet Sit: Sign up with Rover to become a dog walker or pet sitter, earning extra money while enjoying the company of animals.
Answer Surveys: Participate in online surveys for extra cash. Recommended survey companies include American Consumer Opinion, Swagbucks, Survey Junkie, Branded Surveys, and Pinecone Research.
Sell Printables on Etsy: Create and sell printables on Etsy as a flexible side hustle. Find out more about this in How I Make Money Selling Printables On Etsy.
Become a Bookkeeper: You don’t need accounting experience to become a bookkeeper. Learn how at Make Money At Home By Becoming A Bookkeeper.
Sell Items on Amazon: Explore opportunities to sell items on Amazon through their FBA program. Learn more at How To Work From Home Selling On Amazon FBA.
Deliver Items with Postmates: Join Postmates to deliver food, drinks, and groceries, potentially earning up to $25 per hour. Check out Postmates and sign up here.
Find a Part-Time Job: Consider taking on a part-time job to allocate additional income to your savings fund.
Flip Items for Resale: Learn the art of flipping items for resale from How Melissa Made $40,000 In One Year Flipping Items.
Work Overtime: If possible, explore opportunities for overtime at your current job to boost your income.

Making extra money doesn’t have to be complicated. Explore these options and find the ones that suit your skills and schedule to accelerate your journey toward homeownership.

As you can see, there are many ways to make extra money to put towards your savings fund.

6. Find ways to be more motivated

Saving money for a home is a big task that might take a while. It could be a few years before you have enough money. If you’re aiming to save for a house in, let’s say, 2 years, those 2 years might seem like a really long time. Staying motivated throughout can be tough.

Here are some simple ways to keep yourself motivated while saving for your future home:

Create a Visual Reminder: Make a picture, vision board, or something that shows your money goal. This way, you can see your progress and remind yourself why you’re saving.
Reward Yourself: Treat yourself to things that bring you joy and relaxation. Spend time with family and friends, practice self-care, or do things that make you happy. It’s a way to appreciate yourself for sticking to your savings plan.
Imagine Your Future Home: Picture how amazing it will be once you’re living in your dream home. Thinking about the end goal can keep you excited and motivated to keep saving.

Remember, saving money takes time, and it’s okay to reward yourself along the way. These little motivators can make the journey to your dream home more enjoyable.

7. Save your windfalls

Unexpected cash boosts, like a tax refund or work bonus, can speed up your home savings.

While it might be tempting to treat yourself with these windfalls, putting them towards your house fund is a smart move if you’re aiming to learn how to save for a home.

The benefit? Seeing your house fund grow rapidly can be a great motivator, encouraging you to keep up with your saving goals.

8. Save for a house with a better bank account

Many people put their money into savings accounts, but these often don’t pay much interest, sometimes none at all. On average, the interest you earn, called the APY, is only 0.05%.

If you choose a bank with a higher APY, your money can actually grow and work for you. While a higher APY won’t make a huge difference, it’s a step toward learning how to save for a down payment.

What is the fastest way to save for a house?

The process of buying a house is exciting, and I understand the desire to save for it quickly. The tips mentioned above offer various ways to save money for your own home. By combining these strategies, you can speed up your savings journey.

First, how much should I save for a house?

How much should I save for a down payment?

What are the costs of buying a home?