How to Start Saving for a House: 10 Tips to Reach Your Down Payment Savings Goal

Understanding how much you need to save to buy a house can make the buying process less scary. That amount you need varies depending on the type of loan you choose and the cost of the home you want.

For a conventional loan, the standard down payment is 20% of the home’s purchase price, but they can be as little as 3% depending on the lender or program you use.⁵

Putting at least 20% down can help you avoid having to take out private mortgage insurance (PMI) and reduce your monthly payments. For a $300,000 home, this means saving $60,000. While it’s a larger amount to save, it can provide long-term financial benefits.

Look for programs requiring lower down payments

If you can’t afford to save 20% for a down payment, there are mortgage programs that offer lower down payments that may fit your situation better. Here are a few to consider.

No down payment: Some specialized loans, like VA loans for veterans or USDA loans for rural buyers, offer a 0% down payment.⁵  This means you don’t need to save anything upfront, but you will need to cover other costs like closing fees and private mortgage insurance.

Low down payment conventional loans: The Conventional 97,⁶ HomeReady, and Home Possible loans are all affordable options with just 3% down for homebuyers with good credit. Conventional 97 allows a 3% down payment and has no income limits. HomeReady is a loan from Fannie Mae and offers a 3% down payment to those who meet income requirements. And Freddie Mac’s Home Possible is a 3% down payment program for homebuyers within certain income limits.⁵

FHA mortgages: For those without strong credit, the Federal Housing Administration (FHA) allows down payments as low as 3.5%.⁵ If you get a FHA loan, the agency will require you to pay a mortgage insurance premium (MIP), which is like private mortgage insurance. MIP protects the FHA from losing money if you default on your loan. Depending on how you pay it, it may increase your mortgage payment slightly.⁷

State or local down payment assistance (DPA) programs: There are over 2,500 of these programs available nationwide. They offer funds to pay all or part of your down payment or closing costs, reducing the amount you must save to buy a home. They vary by state, so check your state’s program for details.⁸

Many of these special programs are for first-time homebuyers and may require you to qualify for them by taking first-time homebuyer courses. Their goal is to show you how to get a mortgage and keep your home once you do. The DPA program will tell you what you must do to qualify for their help.

Saving up for your house down payment may seem hard, but it’s a skill you can do with the right strategies. Here are 10 tips for saving for a house you can use to reach your goal faster.

• Rent out your spare room, car, or parking space. Generate extra income by renting out unused spaces or assets. There are platforms that can help you identify these rental opportunities.
• Sell things you don’t use or need. Clean out closets and storage to find items that have any value that you’re not using. Sell them online or at a flea market.
• Seek home-buying assistance. Look for down payment assistance (DPA) programs that can help reduce the amount you need to save. Your state, county, or local nonprofits may offer grants or low-interest loans.
• Automate your savings. Set up automatic transfers to your savings account to ensure consistent savings. You can also explore apps that round up purchases and save the change.
• Create a more effective budget. Track your spending and find areas where you can cut costs to save more. Budgeting tools and apps make it easier to categorize expenses.
• Consider downsizing your living space. Moving to a smaller, less expensive home or apartment can help you save on rent.
• Request a salary increase. Ask for a raise at work or seek higher-paying job opportunities to boost your income.
• Explore other income opportunities. Take on a part-time job or freelance work to increase your earnings. Find a side hustle that fits your skills and interests to earn extra money.
• Forego a vacation. Skip a costly vacation and save that money towards your down payment instead. Find “staycation” activities that can provide restful experiences instead of travel and save money.
• Move in with family or friends temporarily. See if you can live rent-free in exchange for child or senior care or doing maintenance work around the house or property.

Saving for a down payment is a step-by-step process that can make your home-buying dream a reality. Here’s how you can get started:

1. Set a savings goal: Decide how much you need for the down payment based on the loan and home price. Having a specific target makes it easier to stay focused. Break your goal into monthly or quarterly goals to stay motivated.

2. Spend less as you reach your goal: Cut back on unnecessary costs like eating out, entertainment, and shopping. Move that money into your savings account instead. Use cash envelopes to avoid impulsive spending.

3. Improve your credit score: One of the best ways to get a better mortgage rate is to improve your credit score. You can get lower interest rates and better terms with a higher credit score. There are strategies you can use to raise yours quickly.

4. Use your tax-advantaged accounts: Look into using a Roth IRA to save for the down payment. First-time homebuyers can take out contributions tax and penalty-free. But do so carefully to avoid penalties.⁹

5. Cut unnecessary expenses: Get rid of costs you don’t need, like streaming services or pricey gym memberships. Also, try to negotiate a lower rate for your cable, internet, insurance, and other bills.

Saving for a house takes time, so be patient and consistent with your savings. Make sure to stay dedicated and have smart financial planning. By understanding how much you need and using these tips for saving for a house, you may be able to make your dream of homeownership a reality.

Learning how to save money for a house can also help you get the discipline you need to keep up with mortgage payments once you have that key to your house.

For more tips on becoming a homeowner, read our guide on how to become a homeowner.