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How to Save for a House

Understanding your expected costs is very important when it comes to saving for a home. You can also consider things like automating your payments and downloading a savings app.

Aly J. Yale Aly J. Yale Updated February 24, 2021

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

Buying a home can be expensive, but that doesn’t mean it’s an entirely out-of-reach goal — regardless of what your income might be. Really, it’s just a matter of saving and spending carefully.

If you’re hoping to become a homeowner soon, here’s how to save for a house:

  1. Know what costs to expect
  2. Understand what you can afford
  3. Pay down debt
  4. Automate it
  5. Find areas for temporary cutbacks
  6. Have a dedicated savings account

1. Know what costs to expect

The first step is to understand what costs you’re facing as a homebuyer. Sure, there’s the down payment and closing costs to worry about, but there are also several other costs.

Here’s a quick look at the typical expenses you can expect when buying a house:

ExpenseInterest rate
Closing costs2% to 5% of your home’s purchase price
Min. down paymentFHA loan: 3.5% of purchase price
Conventional loan: 3%
VA loan: $0
USDA loan: $0
Moving costsLocal: $550 to $2,000
Long distance: $2,000 to $7,500
Emergency reserves2 to 12 months of mortgage payments, homeowners insurance, taxes, and other costs in case you lose income
Inspection fee$300 to $500
Property taxesVaries by location
Homeowners insurance$828 to $1,498 per year on average
Mortgage insuranceFHA loan: 1.75% of your loan balance upfront and 0.45% to 1.05% annually
Conventional loan: $30 to $70 per month for every $100,000 borrowed
HOA dues$200 to $300
(monthly average)
UtilitiesVaries
Maintenance and repairs$1,105
(annual average)

Find Out: Should I Rent or Buy? How to Make the Best Choice

2. Understand what you can afford

You also need to know how much house you can afford — both on a monthly basis, as well as annually. Monthly costs will include your mortgage payment and utility costs, for example, while annual costs will likely be repairs, maintenance, property taxes, and HOA dues. Keep in mind, though, that if you use a mortgage to buy your home, your lender might collect property taxes and HOA dues in the monthly payment to hold in the escrow account.

Calculate it! Comparing rates with Credible can give you an idea of how much house you can afford with our instant streamlined pre-approval tool.

Find out how much you’ll owe over the life of your mortgage using our home loan calculator below.

Enter your loan information to calculate how much you could pay

? Enter the total amount borrowed $
? Enter your annual interest rate %
or
? Enter the amount of time you have to repay your loan years
Total Payment $
Total Interest $
Monthly Payment $

With a $ home loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the mortgage.


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3. Pay down debt

If you have a lot of debt, paying it down could really help your savings efforts — especially if they carry high interest rates.

Think of it this way: The more interest you’re paying, the less money you have to save. If you reduce some of that interest you’re paying by getting rid of debt, you’ll save more cash to put toward your dream home. Plus, a lower DTI could help you secure a lower interest rate and afford a more expensive house if that’s your goal.

Try living like you already have a mortgage. Take your estimated new payment, subtract your monthly rent, and put the difference into savings. You’ll need to live with that larger payment soon enough; starting now could mean meeting your savings goals even faster.

Learn More: How to Know If You Should Buy a House

4. Automate it

Set up regular automatic deposits into your savings fund, and make sure you’re contributing regularly to your efforts. You can set up recurring deposits once a week, once a month, or even after every payday. You can also talk to your employer about depositing a portion of your paycheck directly into your savings account if they’ll let you.

Use an app! Apps like Chime and Acorns can help you automate your savings, and they also offer “round-up” features. These round all your transactions up to the nearest dollar, depositing the “change” right into your account for safe-keeping.

5. Find areas for temporary cutbacks

If you can reduce your expenses anywhere, you should — even if it’s only temporary. Can you do without that HBO or Netflix subscription for a few months? What about lowering your grocery bill? Could cooking more at home instead of eating out so much save you some extra cash each month?

If you cut back in your budget in any way, you can put the savings there toward your new home.

Don’t cut back on your 401(k), though. Remember, you shouldn’t stop contributing to your retirement accounts just because you’re saving for a house. If you want to cut back a bit, don’t go below your company’s matching threshold or you’ll lose out on free money.

Read On: What Happens If You Use Your 401(k) to Buy a House

6. Have a dedicated savings account

Finally, make sure you’ve established a separate savings account for your goals. Don’t put designated homebuying money in your checking account, and avoid depositing it into a saving account you have easy access to. You want to avoid dipping into that fund at all costs.

Choose the right account. Your homebuying fund should be difficult to access (no checks or debit card), and it should earn interest, too. The higher the interest rate, the better.

Find more ways to lower costs

If buying a house still seems like a pipe dream, you might try reducing your expected homebuying costs if possible. Here are some ideas:

  • Assistance programs: Down payment assistance programs help reduce (or cover) your down payment or closing costs. Eligibility is usually based on income.
  • Negotiation: There’s actually a lot you can negotiate for during the homebuying process. Consider negotiating with the seller or inspector, or think about asking your real estate agent for a rebate on their commission.
  • Shop around: Always shop around for your mortgage loan, as lenders offer widely varied rates and terms. There should also be a section on your loan estimate titled “services you can shop for.” Comparison-shop for these items, too, and make sure you’re getting the lowest rates.

Find Out: How to Get a Mortgage Pre-Approval

If you’re ready to start shopping around for a mortgage, Credible can help. Filling out our form takes just a few minutes and then you can compare multiple lenders to find the right fit for you.

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  • Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.
  • We keep your data private: Compare rates from multiple lenders without your data being sold or getting spammed.
  • A modern approach to mortgages: Complete your mortgage online with bank integrations and automatic updates. Talk to a loan officer only if you want to.

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About the author
Aly J. Yale
Aly J. Yale

Aly J. Yale is a mortgage and real estate authority and a contributor to Credible. Her work has appeared in Forbes, Fox Business, The Motley Fool, Bankrate, The Balance, and more.

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First-Time Homebuyer Guide


  • First-Time Homebuyer Qualifications
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  • First-Time Homebuyer Tips
  • How to Save for a House
  • Down Payment Strategies
  • First-Time Homebuyers Tax Credits
  • Buy a House with Student Loans
  • FHA Loans: Ultimate Guide

Homebuying Guide

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