With a 20% down payment, you’d need to save around $83,698 for a home priced at $418,489. A lower down payment means you might have to pay private mortgage insurance (PMI), which typically ranges from 0.5% to 2% annually on the remaining loan amount.
Wondering why? A larger upfront payment leads to better loan terms, lower interest rates, and cheaper monthly payments. But don’t stop there, get a mortgage preapproval, so that you know how to save for a house and speed up closing.
How Much Should I Save for a House?
It’s best if you save for a house with 10–20% down, as it lowers mortgage insurance and monthly payments. Account for closing costs as well, which usually add another 2-5% on the home’s price. Some loans let you put down as little as 3%, but you get higher overall costs.
Beyond the upfront costs, factor in expenses related to moving, home maintenance, and repairs. Also, keep at least 3 to 6 months’ worth of savings to ensure financial stability during the transaction. This will help you close the deal stress-free.
How to Save Money for a House?
Saving for a house is one of the biggest financial steps you’ll take, and knowing how much to set aside is crucial. Here are the best ways to save money for a house:
| Category | Details |
| Down Payment Assistance Programs (DPAs) | Many lenders offer options with lower down payments than the traditional 20%. This could include local DPAs. |
| Loan Programs | Different loan programs have varying down payment requirements. Most conventional loans need just 3% down. |
| Subsidized Loan Programs | Some programs, like VA and USDA loans, offer zero or low down payment options. |
| Other Financial Aspects | Factors like credit score, income, and debt-to-income ratio influence the required down payment and loan eligibility. |
» Pro Tip: Consult a mortgage lender to determine the best down payment strategy for your financial goals.
What to Consider While Saving for a Down Payment?
Here’s how to save for a house like a pro:
- Closing Costs: These are expenses that every buyer or seller incurs to finalize the home sale. Closing costs vary for both and range from 3-6% of the total loan amount.
- Moving Expenses: This is your budget for moving vehicles, labor, and packaging. Cutting down on moving expenses is one of the best ways of saving money for a house.
- Emergencies: Realistically account for emergencies while saving for a home. This could include a job loss, medical situations, or the death of a spouse.
5 Ways to Save Money Fast to Buy a House
If you’re wondering how to save up for a house, here are the 5 best ways to do it:
1. Reduce Spending
The best way to save for a house is to cut down on discretionary spending. Limit eating out, skip expensive coffee runs, and dial down on impulse purchases. This includes designer clothes or high-end gadgets.
Finally, redirect these savings toward the down payment for the house you want to buy. This can significantly accelerate your progress. Focus on essentials and invest in assets that hold long-term value.
2. Hold Off on Your Retirement Savings
While saving for retirement is essential, temporarily lowering your contributions can free up extra funds for your home savings. This can be a smart move if you’re eager to buy a house in the near future.
However, avoid withdrawing from your retirement account, as this may result in hefty penalties and taxes. Once you’ve secured your home, you can increase your retirement contributions again.
3. Explore Government Programs
Government-backed home loan programs such as FHA loans, VA loans, and USDA loans can make home buying more convenient. These programs are highly accessible low down payment options to buy a home.
These programs reduce financial barriers, which makes it easier to qualify for a mortgage and secure favorable interest rates. If you’re looking for options to make saving for a down payment on a house easier, these programs could be a game-changer.
4. Reduce and Manage Recurring Expenses
Everyday costs such as groceries, utilities, and transportation can eat into your savings. Use a budgeting app to help you track where your money goes and identify areas where you can cut back.
You can also start budgeting for a house by downsizing expenses, like shifting to a smaller apartment. Move to a more affordable area, or use public transportation effectively. Small changes in daily spending can add up to substantial savings over time.
5. Create a House Saving Plan
Create a house-saving plan by making a realistic budget to determine how much to save for a house, including the down payment. For that matter, you must carefully examine the income and expenses.
Set aside a certain amount each month to save for a down payment. For consistency, consider automating transfers to a special savings account.
Pay Off Debt or Save to Pay Down?
If you can’t decide between paying off your debt or saving for a house, here’s a quick comparison between the options to help you decide:
| Option | Pros | Cons |
| Pay Off Debt First | ✅ Improves credit score, makes mortgage approval easier. ✅ Lowers debt-to-income ratio, increases loan eligibility. ✅ Reduces financial stress and interest payments on debt. | ❌ Delays homeownership, as saving for down payment takes longer. ❌ You might miss out on favorable real estate market conditions. |
| Save for a Down Payment First | ✅ Allows you to buy a home sooner and start building equity. ✅ Reduces loan amounts and monthly mortgage payments. ✅ Helps avoid private mortgage insurance (PMI) by putting down 20% or more. | ❌ Keeping high-interest debt can hurt your credit score and increase your financial burden. ❌ A lower credit score might result in higher mortgage interest rates. |
Having a lot of debt might lower your credit score, which makes getting a favorable loan difficult. However, a better score can fetch you a lower interest rate. This is the best way to save for a home: pay off your debt first, then look for ways to save for a down payment.
How Can I Save for a House Effectively?
The best way to save money for a house involves more than saving for a down payment. You’ll also need to learn about housing market trends, closing costs, and moving expenses. Ensure you’re financially stable, repay debt, and budget smart for better mortgage terms.
You can also take advantage of first-time homebuyer programs, and financial assistance options can further ease the home-buying process. Explore budget-friendly homes for sale on Houzeo, America’s best home buying website.
