Last Updated: February 2, 2023
A house is so much more than having a roof over your head. It’s a place where you raise your family and invite your friends. But, these days, with skyrocketing real estate prices, dreaming of owning a house can remain just that – a dream; unless you start saving money. We are here to help you figure out how to save for a house.
How to Save for a House?
You might think that saving is easier said than done. But, with a solid saving plan, anyone can save enough for the house of their dreams. Several simple steps can help make saving for a house easier:
Determine How Much You Need and When
First, you need to decide how much of the house’s worth you can afford, and then how much you’ll need for a downpayment.
Many experienced home buyers think that the best alternative is to leave 20% as a downpayment. The pros of putting 20% down are that you are freed from mortgage insurance, you have a smaller loan size, and lower monthly payments.
If you cannot afford to make a 20% downpayment, mortgage lenders require a minimum of 3% downpayment (depending on your income and credit history). Fortunately, there is a great chance you’ll get a mortgage even if you have bad credit.
So, how long does it take to save for a house? This depends on how much you can afford to set aside every month.
|Did you know: A survey found out that the average down payment on a house in the US is far below 20%.|
Mind Your Budget
Here are suggestions on things you could do:
When it comes to advice on how to save for a house, you should get a clear picture of your spending patterns. A well-thought-out budget plan can help you gain control of your finances. Start by allocating your spendings based on your financial situation. For that, you need to divide the expenses into the essentials (utilities, insurance, etc.) and the luxuries (concert tickets, going out every single day, buying unnecessary clothes, etc.).
Cutting Out Unnecessary Expenses and Bad Habits
The best way to save for a house is to cut down on things you might see as necessities. Cutting down on things like eating out or giving up Starbucks is one step towards achieving your goal. Try cooking at home and making your own homemade coffee, instead. Moreover, cutting on bad habits can help you save money. For instance, you may decide to give up smoking.
Downsizing is another option when budgeting. When you decide to downsize, you reduce the amount you pay for necessary expenses and divert that money into a savings account. Downsizing may include moving into a smaller apartment or selling your car.
|Did you know: Everyone can learn how to be good with money when they need to start saving up.|
Get Extra Money
Now, check these suggestions if you need more money:
Get a Side Gig
A side job is another way to increase your income. Say you have a teaching degree – you might want to look for online sites that are searching for freelance teachers. Or if you love animals, you could tell all your friends who own a pet that you are willing to pet sit if they are ever in need of someone to watch out for their pet.
Ask for a Raise
When weighing up your options on how to start saving for a house, asking for a raise might be a great place to start. Make sure you find the perfect moment, though. You should ask for a raise only after a project well done and sound confident.
Ask for Money for Birthdays, Instead of Things
If you are still wondering how to save money for a house, tell your relatives and closest friends that you would prefer money over gifts for your birthday. You might be surprised how many will oblige.
Rent Out a Room or a Parking Space
If you are wondering how to save for a house, think about whether you have a spare room you can rent out? Or got a garage you don’t use? It’s a simple way to earn additional income. Depending on where you live you could get around $250 a month – that’s $3,000 in 12 months. However, keep in mind that if you live on rent, you need to get the landlord’s consent to rerent any kind of space.
|Decide how much money you should save for a house before you start.|
|The best way to save money is to allocate your spendings 50/30/20 – needs, wants, and financial goals.|
|Cut down your expenses to things you cannot do without.|
|You can get extra money by finding a side gig, asking for a raise, renting out a room, etc.|
Settle Your Debts
You should think of settling your debts. At first, this may sound like a crazy idea because you cannot save money if you are paying your debts. It is common for people to live off credit loans, but when trying to figure out how to save money for a house these debts can only slow you down. Once paid off, you can easily save more money. Also, consider consolidating your debts so you can secure a better and lower mortgage interest rate.
|Did you know: You can pay off your debt with a low-interest credit card debt consolidation loan which is an easier and faster procedure that can save you thousands of dollars.|
Cutting down on expenses is a great idea but it’s going to work even better if you set up an automatic withdrawal to a savings account. If you, for instance, cancel your gym membership which costs around $70, you should set up an automatic deposit of $70 to be deducted from your checking account to your savings account. Without further ado, you’ll have $840 at the end of the year in your savings account.
If you’re still wondering, how to save up for a house, saving apps are one other thing to try. The ones that stand out from the crowd are round-up apps that automatically round up the amounts from your everyday purchases and put them into your savings account. For example, if you buy something that costs $7.55, the app will automatically transfer 45 cents into your savings account.
We all know that robo advisors immediately gained in popularity and are even slowly replacing human advisors. The newest and probably most effective product offering is a robo advisor savings account. It’s a dream come true – you can invest and save money all in one platform. You can use the robo advisor of your choice to automate your savings.
Not many can afford to save for a downpayment while still saving for your retirement. So another way how to save for a downpayment on a house fast is to pause retirement savings.
|Did you know: Many people wonder if investing is a good idea due to the fact that there’s a potential risk of losing your money.|
Have an Emergency Fund
If you have an emergency fund, spend it only for real emergencies. Unexpected expenses will come your way, but if by any chance you choose to use your emergency fund, use it only for necessities (food, transport, or housing).
If your down payment is due soon and you still do not have enough, an emergency loan can help you out. An emergency loan is an unsecured personal loan that can cover some unexpected expenses. The options will depend on your credit history as well as the loan amount you need. Emergency loans are relatively small – from around $250 to $1,000.
But, if you are thinking about how to save money for a house in a year you can take a fast personal loan with low-interest rates.
Another option to get some extra money is by going to the pawnshop. Many of us have stuff piled up in our attics – here’s a chance to get rid of it and at a fair price. Still functioning electronics, antiques, or valuable jewelry can be estimated at up to $200 a piece and that’s not bad for something you won’t use again anyway.
|Did you know: Warren Buffett once said, “Do not save what is left after spending, but spend what is left after saving”.|
Saving for a house can be time-consuming and stressful and you may need to sacrifice many everyday things you enjoy. We provided many tips and tricks that can help in this process. Most importantly, make a solid saving plan; it’s all worth the effort if it will let you buy your dream home.
It all depends on your income. Some decide to go with a downpayment of 20% and others opt for a downpayment of 3%. There are mortgage calculators that can help you make a decision based on how much you earn per month.
Saving money is a must when it comes to buying a house. The best way to save money is by cutting down on extra expenses. And don’t forget to set up an automatic withdrawal to your savings account.
The fastest way to save up for a house is to pause your retirement savings (for 1 year maximum) and use these funds for your down payment.