How To Save For A House – 8 Tips To Help You Save

Are you thinking about buying a home? If so, then you’re probably wondering how to save for a house. After all, the price of a home is most likely the largest amount of money that you will ever spend. The median U.S. home value is $266,222, according to Zillow. And, there are some areas that…

Michelle Schroeder-Gardner

Last Updated: June 4, 2023

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Are you thinking about buying a home? If so, then you’re probably wondering how to save for a house.

After all, the price of a home is most likely the largest amount of money that you will ever spend.

The median U.S. home value is $266,222, according to Zillow. And, there are some areas that have much higher average home prices, like four to five times more. For example, in Los Angeles, the typical home price jumps to $804, to save for a house

The first part of saving for a house is the down payment.

But, when you’re figuring out how much to save for a house, you also need to think about incidental costs, like moving expenses, closing costs, things you need for your new home, and more.

Due to this, you’ll most likely have to save a large amount of money. And, you’re probably wondering how you’re going to do that.

To help you learn how to save money for a house, this article will first explain how to figure out the amount of money you need to save. Like I said, there’s more than just the down payment. 

Plus, the amount of money you save for your down payment has a major impact on your monthly mortgage payments. This is why it’s so important to learn how to save for a house now.

Today, I will explain my best tips to help you learn how to save for a house on a low income, while you’re renting, if you have a couple of years to save, and more.

Buying a house is a very big deal, and it is an exciting time in your life. Today’s article will help you prepare so you can focus on finding the perfect home.

Related content on how to save for a house:


First, how much should I save for a house?

Deciding how much to save for a house is personal because home prices vary based on where you live and the kind of house you want to buy. People also have different budgets and financial plans.

Despite all of those differences, there are some expenses that every home buyer will need to think, about such as:

  • Your down payment, which can be anywhere from 3% to 100%, as discussed below.
  • Closing costs (such as title insurance, home inspection, taxes, and so on). This can be around 2% to 5% of the home loan amount.
  • Moving expenses, such as furniture, moving transportation, and so on.

So, when you create your budget to decide how to save for a house, you will want to think about those three costs. Now there are more costs, which relate to when you are actually living in the house, and I will discuss them more in the sections below.

Whatever your budget is for actually purchasing the home, you should always keep in mind the total cost of a home.


How much should I save for a down payment?

The more money you are able to save for a down payment, the lower your monthly mortgage payment will be. There are also some minimum down payment requirements you’ll have to meet.

The minimum amount you can put down on a house depends on the kind of loan you are getting. FHA loans, for example, require as little as 3.5% of the selling price as a down payment. Your credit score will also affect how much you are asked to put down on a house. Using the FHA loan again, if you have a credit score in the 500 to 570 range, you will have to put at least 10% down.

So, how much you put down on your home depends on factors such as:

  • The mortgage terms you agree to
  • Your credit score
  • If your goal is to pay off your house early or not
  • How much home you can afford

And more.

Some homeowners are able to secure a low mortgage interest rate, and may not mind having the home loan debt. Others may want to pay off their home as quickly as possible. Some even decided to pay for their house in cash.

Many homeowners try to put at least 20% down on their new home because then you do not have to pay private mortgage insurance (PMI), which can be a couple hundred dollars added to your monthly mortgage payment. So, this is a big factor that you will want to think about.


What are the costs of buying a home?

Living in a home can have more costs than you may realize, especially if you’ve always rented before.

So, when you start shopping for a home, I want you to think about all of the costs that come with owning a home, as it may change how much you think that you can afford. There may be more ongoing costs than you realize.

Factoring in homeownership costs is extremely important if you want to learn how to save for a house, because they can cost around $9,000 per year on average depending on where you live.

Ongoing homeownership costs may include:

  • Property taxes Property taxes can vary significantly depending on your area. Two very similar homes that are just a few miles apart can have different property taxes that vary by thousands of dollars each year.
  • Electricity/gas Generally, the bigger your home, the higher your electricity and gas bills.
  • Sewer Not expensive, but it is a bill you will have to pay.
  • Trash This isn’t super expensive either, but it does cost money.
  • WaterYour water bill may be several hundred dollars a month, depending on where you live.
  • Home insurance Like with everything, home insurance can vary widely depending on the home value, area, and so on. You will also want to look into additional policies such as for earthquake, flood, and hurricane insurance.
  • Maintenance and repairsWhether your home is brand new or older, you will most likely have maintenance and repairs to pay for. This may include yard maintenance, gutter cleaning, roof repair/replacement, appliance replacement/repair, and so on.
  • Homeowners association fees (HOA) HOA fees can vary widely.

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


How much money should you save to buy a house?

How to save for a house

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

As soon as you start house hunting, you want to set a budget. You should actually set your budget before you even start looking at homes to manage your expectations.

Your budget will help you understand the amount you want to be pre-approved for, and a realtor will use this information to help you find homes to look at.

After all, there is no point in looking at $1,000,000 homes if your budget is $250,000. In fact, I don’t recommend looking at homes over your budget. It’s too easy to fall in love with something you can’t afford. Some people will even try to force the home purchase in their budget, which can cause you to spend much more than you should on a home.

Setting a budget for the total price of your home plus thinking about other expenses will help you learn how to save for a house.

You will want to look at your overall financial situation and analyze:

  • The amount of income that you earn monthly and annually.
  • The total you have saved for the down payment and homeownership costs.
  • Your credit history and credit score.
  • The amount of money that you feel comfortable with when it comes to homeownership.
  • Your total amount of debt.

And more.

These are all important factors to think about when coming up with your home budget.

Now, I do not recommend just taking the amount that the bank pre-approves you for and running with it.

This is because banks often approve people for mortgage amounts that are much higher than what they can actually afford. This is for multiple reasons, and one is because it doesn’t factor in the total cost of homeownership.


2. Create a monthly budget

Now that you know how much you want and can afford to spend on a home, you’ll also want to make sure you have a monthly budget.

You can use a down payment savings calculator to figure out how much to save each month and if your budget allows for it. You can easily find them online, and these calculators need information like the amount you will be purchasing for, timeline, how much you already have saved, and down payment percentage to see how much you need to save each month.

For example, if you wanted to buy a $225,000 home in one year with $5,000 already saved for a 10% down payment, you would need to save $1,459 each month. You can decide if that fits in your budget or if you need to adjust your timeline or home price.

Doing this step will help you manage your money better while you’re in the process of shopping for a house.

A monthly budget will help you to see where your money is going, so that you can put money towards your house fund.

A budget helps you plan for big expenses, not overspend on things, and help you find areas in your budget where you can save money.

Learn more at The Complete Budgeting Guide: How To Create A Budget That Works.


3. Pay yourself first

If you really want to put your house fund at the forefront, then one way is to pay yourself first.

Whenever you receive your paycheck, or at the start of each month, put the amount of money you want to save for your house each month into savings right away.

Paying your house fund first means that you don’t spend money on anything else until you put money towards your house fund. Try to think of your house fund as the first bill you pay each month.

Tips to pay your house fund first:

  • Take a look at how much you are currently saving and spending each month. Start tracking your spending a little more closely and see how much of that is actually unneeded. Calculate how much money you should be saving each month and set that aside at the beginning of each month.
  • Make saving for your home automatic. To make it easier, you may want to set aside a specific savings amount each month automatically. You can schedule a bank transfer or split the direct deposit on your paycheck.
  • Start with a small amount and work your way up to paying yourself more each month if you are worried that you won’t have enough money leftover each month.

Paying your house fund first can easily become a regular money habit in your life, and help you evaluate and realize where your financial priorities are.

In addition to helping you learn how to save for a house, paying yourself first is something you can use to save for retirement and other major financial goals.


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

Because your down payment is such a large amount of money, you may need to find expenses to cut to help you save.

This will allow you to save money faster, of course.

Yes, that means that you may have to make some sacrifices.

Some ideas include:

  • Find alternatives to cable TV. The average cable bill is over $100 monthly, so this can be a big way to save around $1,000 a year.
  • Shop around for cheaper car insurance. Many people overpay for car insurance, when simply shopping around can help them save hundreds, if not thousands, of dollars a year. I recommend shopping around using this free service here.
  • Switch to a cheaper cell phone plan. Republic Wireless has plans that start at just $15 per month.
  • Switch to a cheaper car, or ditch the car altogether if you can. The average monthly payment is around $400, which is a big chunk of change that could be put towards your house fund.
  • Evaluate your subscription services, and then get rid of some. Do you subscribe to monthly boxes such as meal kits, beauty, pet treats, or something else? Analyze what is worthwhile to you.
  • Visit the library to save money on entertainment
  • Buy more secondhand items.
  • Split your costs with a roommate.

And so much more.

I recommend finding all of your expenses, and seeing what you can save money on.


5. Earn extra money for your house down payment fund

Finding ways to make extra money can help you save money for your home quickly.

If you want to learn how to save for a house while renting or on a low income, making more money is the best way to save up for your house. That’s because there’s only so much you can do with what you’re currently earning, and you may have already cut your expenses as much as possible.

Whatever your goal may be, making extra money can help you reach your financial goals faster.

Some of the ways to earn extra money include:

  • Ask for a raise – When was the last time you asked for a raise? Now may be the time! You can then save this extra money towards your home savings fund.
  • Start a blog – I have a Free How To Start and Launch A Money-Making Blog Course that you can join, and it will help you start and launch a successful blog.
  • Join a focus group – You can earn $50 to $100 per hour or more by joining a focus group with User Interviews.
  • Rent out your RV – Do you have an RV? If so, you may be able to rent it out when you’re not using it, and make some extra money. Learn more at How To Make Extra Money By Renting Out Your RV.
  • Walk dogs and/or pet sit for extra moneyRover is a great company to sign up for if you’re interested in becoming a dog walker and pet sitter. You might be going over to someone’s house to check on their pets or have them stay with you.
  • Answer surveys – Answering surveys online won’t make you rich, but it is one of the easiest ways to earn extra money online. Survey companies I recommend include American Consumer Opinion, Swagbucks, Survey Junkie, Branded Surveys, and Pinecone Research.
  • Sell printables on Etsy – Creating printables on Etsy can be a great side hustle. Because you are creating PDF files, you can create and sell them an unlimited number of times. You can learn more at How I Make Money Selling Printables On Etsy.
  • Make extra money as a bookkeeper – You don’t have to be an accountant or have any previous experience! You can read more about how becoming a bookkeeper at Make Money At Home By Becoming A Bookkeeper.
  • Sell items on Amazon – Learn more at How To Work From Home Selling On Amazon FBA.
  • Deliver items through Postmates – Postmates is a service that lets people use their phones to order food, drinks, and groceries. Delivering those items is where you come in! Postmates says that you can earn up to $25 an hour with their platform, but most drivers average closer to $15/hour. Click here to check out Postmates and sign up.
  • Find a part-time job – A part-time job can allow you to put all of that extra money towards your savings fund.
  • Flip items for resale – Learn more in How Melissa Made $40,000 In One Year Flipping Items.
  • Work overtime – Are you able to make extra money by working overtime at your current job?

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 for a home means you are saving up a very large chunk of money. And, it may take you several years to reach your goal. 

For example, if you are wanting to learn how to save for a house in 2 years, 2 years can feel like a very long time. It can be difficult to stay motivated the whole time.

Some ways to stay motivated with saving for your future house includes:

  • Create a graphic, vision board, or something else that demonstrates your financial goal.
  • Reward yourself by practicing self care, spending time with family and friends, and doing things that make you happy.
  • Think about how you will feel once you are living in your future house.

Related: 12 Ways To Stay Motivated So You Can Reach Your Money Goals


7. Save your windfalls

Windfalls are unexpected chunks of money, and they can help you save for a house quickly.

This could be your tax return, work bonus, etc. It may be tempting to use those chunks of money to reward yourself in some way, but if you want to learn how to save for a house, windfalls can really help.

Another nice thing about saving your windfalls is that they can motivate you to keep saving because you’ll see your house fund quickly grow.


8. Save for a house with a better bank account

Most people save in savings accounts that pay very low or no interest at all. In fact, the average savings account APY is only 0.05%.

If you save at a bank that offers a higher than average APY, you are letting your money work for you and grow. 

Now, a higher APY won’t make a huge difference, but every little bit helps when you are learning how to save for a down payment.


What is the fastest way to save for a house?

Buying a house can be an exciting process.

Due to this, you may want to save for a house as fast as possible, and I completely understand that.

With the tips above, you’ll learn about many different ways that you can save money for a home of your own. Combine them together and you’ll be able to save quickly.

What other questions do you have on how to save for a house?


*Statistic from Zillow

Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Zach

    Motivation is such a great tip! That’s such a great idea to include in this list!

  2. Thanks for sharing, I will make a plan for buying a house in this year but I think it is not easy in the COVID crisis period.