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11 Ways To Save For A House: Tips To Fund Your Down Payment

April 14, 2024 9-minute read

Author: Miranda Crace


Saving up enough to buy a home can feel impossible, but understanding how to save for a house can transform that impossibility into a realistic goal. With a solid saving plan, many people are able put away enough for a down payment on the home of their dreams. In fact, you might be closer to having the amount you need for a down payment without even realizing it. If not, there are several simple strategies you can use to make saving for a home a little easier.

Let’s dig into some tips and tricks you can use to save for a down payment on your future home.

How Much Should I Save Before Buying A House?

Having some cash on hand is a necessity for those looking to buy a home, but how much money should you actually save before buying a house? In short, you should have enough saved to cover closing costs, moving expenses and the down payment. The exact dollar amount this equates to varies from buyer to buyer, based on the home’s sale price and the amount you want to put down.

Here’s a quick breakdown of the expenses you’ll want to save for before buying a house:

  • Down payment: This can range anywhere from $0 to 20% of the home’s purchase price. We’ll look more at how much to save for a down payment later on, but for now, know that most home buyers with conventional loans need to have at least 3% – 5% to put down.
  • Closing costs: You’ll need to pay closing costs on your mortgage loan when you buy a home. These will cost you about 3% – 6% of the total loan amount.
  • Moving expenses: The typical cost of a local move is $900 – $1,500, and a long-distance move can jump up to $10,000 and beyond. But the actual cost varies based on factors like how much stuff you have to move and whether you hire movers.

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How Much To Save For A House: Know Your Down Payment

Some potential home buyers believe that homeownership will never be attainable because they can’t afford a 20% down payment. The truth is that many lenders no longer require 20% down. So how much do you need for a down payment? It may be less than you think.

3% Or Less

Depending on your credit score and income, first-time home buyers may be able to get a conventional loan with as little as 3% down. If you qualify for a U.S. Department of Agriculture (USDA) or Department of Veterans Affairs (VA) loan, you can even buy a home with no down payment at all. At this time, Rocket Mortgage® doesn’t offer USDA loans.

If you don’t qualify for a USDA or VA loan, you’re not completely out of luck. Some states aid first-time home buyers. As you begin saving for a house, research the down payment assistance programs available in your state and see if you meet the qualifications.

The 20% Down Payment Myth

Why do so many people believe that they need 20% down to buy a home? The 20% down payment myth comes from the private mortgage insurance (PMI) rule that most mortgage lenders and mortgage investors have.

If you have less than 20% down at closing, you may need to pay for private mortgage insurance as part of your monthly mortgage payment. Though having a 20% down payment will save you money over time, it’s not a requirement to buy a home.

Home Affordability

If you’re just beginning your home buying journey, a great place to start is figuring out how much home you can afford. Once you take this into consideration, you’ll be able to get a realistic expectation of what your down payment could be.

If you’re thinking about buying soon, it’s a good idea to get your mortgage preapproval so you have a better idea of what you can afford. This will also give you a good understanding of how much you need to save for a down payment, since that amount is typically determined by taking a percentage of the home’s purchase price.

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11 Ways To Save Money For A House

Once you know how much money you need to buy a home, it’s time to start saving. Whether you’re just starting to save or you already have some cash in the bank, you can use these strategies to start saving for your future down payment.

1. Build A Better Budget

The first step in the saving process is budgeting. If you don’t know where your money goes every month, it’s impossible to divert money to your down payment. Here are some steps you can follow to help put a budget in place.

Calculate Your Monthly Take-Home Pay

First, make sure you know how much money you’re bringing home each month, and include income from a spouse or partner if they’ll also be contributing to your down payment. Then, sit down with your bank statements and all your credit card payments. Look at where you’re spending the most money.

Factor In Your Recurring Expenses

Note how much you spend on necessities like rent, student loan payments, groceries and utilities. Then consider how much you spend each month in nonessentials like entertainment, restaurants, etc. A budgeting app can help you automate this process if you’d like to avoid calculating your expenses yourself. If it all still seems overwhelming, enlisting the help of a financial advisor can help you get a better idea of what your budget should look like.

Determine What Other Expenses You Can Cut

After you create your home buying budget, look for other expenses you can cut. Set a definite (yet realistic) budget for each category and stick to it. Make sure you budget a certain dollar amount to put away for your down payment each month. Consider your savings a non-optional expense.

2. Consider Downsizing

One fast way to save more money toward a down payment is downsizing. Downsizing is the process of reducing your expenses and living below your means while you save. When you downsize, you essentially practice minimalism by only spending money on the things you need. You only spend money on necessary expenses and divert the extra money into a savings account.

3. Reduce Expenses Or Cut Out A Bad Habit

Reducing or entirely cutting a single bad habit can help you put away hundreds of dollars a year. Consider quitting these unhealthy habits and divert more of your monthly take-home pay to your down payment fund.

Impulse Buying

If you're prone to impulse shopping in person or online (who doesn't love getting deliveries?), you may consider cutting down on those purchases. Try to unsubscribe from marketing emails so you don't constantly see deals in your inbox. You'll save money and avoid piles of clutter around your home. Canceling subscriptions for services that make impulse purchases easier, such as those that offer free and fast shipping, might help.

Eating Out

There's no denying that takeout and fast food are quick and easy. But they’re not so easy on our wallets. To save a bit of money, try cooking a few meals at home each week instead of ordering out or paying to have food delivered to you. Not only will you be able to save some money, but you may also notice some added health benefits.

4. Ask For A Raise

Do you have little money left over to save after you get paid? It might be time to ask for a raise.

The best time to ask for a raise is during your annual performance review or after delivering a big win. Your attitude during your salary discussion meeting is just as important as what you say. Be confident in what you’re asking, but also be grateful and enthusiastic.

5. See What Other Employment Options Are Out There

While it’s not always possible, switching jobs and landing a higher-paying salary can help you save money for your down payment.

Browse job posting sites and salary comparison websites to see if you earn as much money as people who work in similar roles. If you discover your salary is below average, consider using your findings as leverage to ask for a raise or inquire about a promotion at work.

If you aren’t in love with your job or you can’t get a raise, consider searching for higher-paying positions you qualify for.

6. Skip A Vacation

Exploring a new destination can be an amazing experience. Unfortunately, it’s also often an expensive one. The average family of four spends about $4,500 on vacation – that’s a big chunk of cash. Consider storing that money for a down payment and enjoy a staycation in your city instead.

7. Pick Up A Side Hustle

In the on-demand “gig economy,” it’s easier than ever to earn money on your own time with a lucrative side hustle. If your schedule allows for a little extra work, here are a few ideas you can use to get started:

  • Pick up some freelance work
  • Drive for a ridesharing company
  • Pet sit or -walk
  • Test apps and websites

8. Chop Down Your Debt

If you’re on a mission to buy a home, diverting your extra income toward your debt might seem counterintuitive. However, one of the first things lenders look for when they consider you as a mortgage candidate is your debt-to-income ratio (DTI).

A higher debt-to-income ratio can impact your ability to qualify for a mortgage in the first place and may influence the interest rate and amount that your lender will be willing to offer. This can mean that you’ll pay more in interest and have a higher down payment requirement.

Take some time to reduce your debt before you apply for a mortgage loan. Look at exactly how much you owe on your credit cards, student loans, personal loans and auto loans, and create a plan to tackle it.

9. Rent Out Your Spare Room, Car Or Parking Space

Do you have an extra bedroom in your apartment? Is your car collecting dust since you’ve transitioned to remote work? If so, consider listing them on websites like Airbnb and TURO to leverage your assets to receive a consistent monthly payment. Be aware that rules and regulations for renting property differ across the country, and you might live in an area with significant restrictions.

Both platforms let you approve dates and guests ahead of time and only rent out your car or spare room when it’s convenient. You can even block out dates when your rental isn’t available, or when you know you'll need your car.

If you live in an urban area where parking is at a premium, consider renting out any of your assigned parking with an app like JustPark. JustPark lets you rent out your parking space just like you’d rent out your spare room on Airbnb.

If you live in a tourist destination or heavily populated area, these sources of extra cash can make a huge difference in how much down payment money you can save each month.

10. Ask For Help

There’s no shame in requesting assistance, especially when you’re saving up for something as large as a down payment on a home. More and more home buyers are crowdsourcing their down payments through websites and apps.

You may want to ask relatives and friends to skip physical gifts on holidays and special occasions in lieu of money. This is becoming more common practice at events like weddings and baby showers.

Keep in mind that there are special rules on how you can use gift money to pay for your down payment. Know your mortgage loan types and read about the rules surrounding gift money and down payments before you accept money for your new home’s down payment.

11. Automate Your Savings

If you’re the type of person who’s prone to impulse shopping, you may want to consider automating your savings. Here’s how it works: first, decide how much you want to save per month for your down payment.

Contact your bank and authorize an automatic withdrawal from your primary account into a separate savings account. Your bank will automatically take money out of your account each month and put it into a separate account.

This can be useful for people who have trouble managing their money. When you make your money less accessible, you may be less tempted to buy things you don’t need. Just remember to schedule your withdrawal on your payday or when you know you’ll have enough money. Overdraft fees can put a serious dent in your down payment fund.

The Bottom Line

If you want to save for a house, you should have a solid plan in place. But first, make sure you know how much you need for the down payment. Though many people believe they need a 20% down payment to buy a home, it’s actually possible to buy a house with as little as 3% down or even $0 down, depending on the type of loan.

Whether you’ve already started saving for a house or you’re starting to save for the first time, there are plenty of ways you can save money for a down payment. Start by creating a budget for your household and consider other ways to cut down on expenses or increase your income.

If you’ve been saving and are ready to take the next step, start an application with Rocket Mortgage to get the home buying process started.

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Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years. Miranda is dedicated to advancing financial literacy and empowering individuals to achieve their financial and homeownership goals. She graduated from Wayne State University where she studied PR Writing, Film Production, and Film Editing. Her creative talents shine through her contributions to the popular video series "Home Lore" and "The Red Desk," which were nominated for the prestigious Shorty Awards. In her spare time, Miranda enjoys traveling, actively engages in the entrepreneurial community, and savors a perfectly brewed cup of coffee.