How to Save Money for a House in 10 Steps

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Contributor, Benzinga
July 31, 2023

Many people aspire to become homeowners, but rising housing prices have made that goal more challenging. You have to save enough money for a down payment and then have enough cash left over each month for the mortgage payments. While homeownership is expensive, it is a worthwhile endeavor for people who want to build equity and eventually own a property debt-free. These strategies can help you save money for a house so you can own a home.

1. Assess Your Finances

Assessing your income, expenses and debt can help you determine your ability to afford mortgage payments and create a path to down payment funds. Getting rid of debt and minimizing your expenses will help you save money faster. 

Reviewing all of your expenses through previous bank and credit card statements can help you find unnecessary items. Removing these items from your budget can speed up your path to homeownership. 

While it’s a good idea to save for the down payment, it is also effective to determine how much you can afford through a monthly mortgage payment. If you can afford a high monthly mortgage payment, you may not need to put as much money down. A lower down payment requirement can make a house more attainable, but you must make sure you can keep up with the monthly mortgage payments.

2. Set Clear Goals

Once you assess your finances, you can set realistic but challenging goals. Aspiring homeowners should set a target down payment amount and a deadline for the goal. You should consider your income, expenses and other factors when setting down payment goals. You don’t want to set an overly ambitious goal that is unrealistic because it can feel discouraging not to make progress. An attainable goal inspires action, and you can end up saving more than you had anticipated.

3. Establish a Dedicated Savings Account

Creating a savings account just for your down payment funds separates them from your day-to-day spending. Creating a separate savings account establishes how to use these funds. It’s easier to lose track of how you want to allocate funds if you keep everything in the same checking account.

A dedicated savings account can also have a higher interest rate. Because you won’t need the funds for a while, you can consider putting them into a certificate of deposit (CD). CDs let you collect extra interest on your money. You can make manual transfers or enable automatic transfers from your checking account to your savings account. Auto transfers take place without your involvement, so you don’t have to remember to move funds each month.

4. Increase Your Income

Raising your income will speed up your path to any financial goal. Trimming expenses can work wonders, too, but you eventually reach a limit for how low you can go. You can raise your income by developing new skills, asking for a raise and working side hustles. You can even declutter your home and sell items you no longer need to make extra money.

A higher income will also improve your debt-to-income (DTI) ratio, a key metric lenders look at when assessing your loan application. A lower DTI ratio can result in a lower interest rate and better loan terms.

5. Employ Money-Saving Techniques

Reviewing your monthly expenses can reveal several opportunities to save money. Scaling back on dining and entertainment costs can give you more money for your down payment. Instead of watching movies when they come out or using streaming services, you can get movies at the library. This route is free and provides plenty of entertainment value. Thinking outside of the box can help you save money on everyday expenses.

6. Use Government Assistance Programs

Each state has assistance programs that make homeownership more attainable. Consumers can find first-time homebuyer programs and grants in their states and see whether they qualify. You may have to complete a homebuyer education course and fulfill specific income and home price requirements to qualify.

Getting government assistance can help you save for a home sooner. You may want to speak with a professional before you use a government assistance program.

7. Maximize Retirement Savings

Retirement accounts are tax-advantaged and make it easier for people to enjoy a smooth retirement. Your capital can grow over multiple decades and be there when you need it. A retirement savings account can also be a useful resource for buying a home.

Homebuyers can use a 401(k) loan to buy their home without incurring penalties. Because these proceeds come from a loan, they don’t count as income. You can also withdraw up to $10,000 from an individual retirement account to purchase a home without incurring penalties. Homebuyers must close the transaction within 120 days of receiving the funds. 

You should prudently save money for retirement. A retirement savings account can make homeownership more accessible, but you should work to replenish your funds if you use them for a down payment.

8. Explore Investments for Long-Term Growth

Your money isn’t doing much sitting in the bank. You can earn a return on your capital through a high-yield savings account, but assets like stocks, bonds and mutual funds can achieve more meaningful long-term returns. Putting some of your money in these investments can give you extra cash for a down payment. These assets go to work for you while you continue to grow your income with other strategies. Investors should assess their risk tolerance and financial goals before making investments. 

9. Save for Emergencies

While aspiring homeowners should save money for a down payment, they should also set aside some funds for emergencies. Creating an emergency fund that is separate from your down payment savings account can shield your down payment funds. 

When you receive unexpected bonuses or extra cash, you can allocate some of it to an emergency fund. Although it can get difficult to juggle a down payment fund, emergency savings account and debt, it can get easier over time. Consumers can consider paying off debt first, building up their down payment and emergency funds simultaneously and then doubling down on emergency savings after making the down payment.

10. Track Your Progress

Aspiring homeowners should continue to track their progress with building a down payment savings account. Staying on top of your income and expenses can enforce good money habits and make them stick. 

It is a good idea to celebrate your small wins and milestones, such as reaching key thresholds with your down payment savings account. Those mini-celebrations can help you stay motivated as you acknowledge your progress and set your sights on the next small win.

The Path to Homeownership Is Achievable 

It’s still possible to become a homeowner, even with rising prices. Millions of homes are still sold every year, proving that high prices have not stopped everyone from buying a home. Use the knowledge of this possibility as inspiration to save more money and make more meaningful progress toward your goal. The path to homeownership is hard work, but it will feel worth it when you finally make the down payment and walk into your new place.

Frequently Asked Questions


How much money should I save before buying a house?


Aspiring homeowners should look at the housing prices in their neighborhoods to gauge how much they want to save. It is optimal to save at least 20% of the average home’s selling price so you can avoid private mortgage insurance premiums.


How long does it typically take to save enough money for a house?


It can take several years to save enough money for a house. The amount of time it takes depends on a person’s income and expenses.


Are there specific strategies or tips to save money for a house?


Aspiring homeowners can apply several strategies to save money for a house. They can monitor their expenses and cut unnecessary items and find alternatives to dining and entertainment.

About Marc Guberti

Marc Guberti is a personal finance writer passionate about helping people learn more about money management, investing and finance. He has more than 10 years of writing experience focused on finance and digital marketing. His work has been published in U.S. News & World Report, USA Today, InvestorPlace and other publications.