What is the best way to save for a house?

A big part of the homebuying process that many potential homeowners could find daunting is the down payment.  

Down payments are a percentage of the overall home cost that buyers typically have to pay upfront. These down payments can be a sizable investment, one that is typically dependent on personal savings collected over a number of years. And that’s just a part of the overall mortgage costs you’ll be responsible for in the years to come.  

If you are planning to buy a home, you will need to start saving for your down payment before entering the housing market and getting a home loan. 

Let’s go over a few ways you can save money and prepare yourself to start the loan process. 

Much of the saving that goes into buying a home is for a down payment. 

Down payments are just a portion of the overall cost of buying a home, but since they are paid upfront, down payments loom large in the minds of homebuyers, especially for first-time homebuyers.  

While most people getting ready to buy a house think they need to secure 20% of the purchase price as part of a down payment, that’s not always true. In fact, according to a 2025 report, the national average for down payments for first-time homebuyers was 9%, while the average for repeat buyers was 23%.  

If you qualify for certain first-time homebuyer programs, you could have down payment options as low as 3%. Getting a VA or USDA loan? You may be eligible for zero down payment options. 

Of course, choosing a down payment option of less then 20% could come with private mortgage insurance (PMI) or mortgage insurance premium (MIP). These costs can set you back anywhere from 0.5%-5% of the cost of the original mortgage loan per year until you reach 20% total down payment, at which point PMI might no longer be necessary.  

1. Begin before deciding
2. Create savings goals and design a budget
3. Take a look at existing debt and current expenses
4. Change your current living situation
5. Put a pause on your IRA and 401(k) account
6. Look into a side hustle/part-time job
7. Explore renting out space
8. Consider savings apps and high-interest accounts

If buying a home is something you might want to do someday, beginning to save before even making that decision is one of the smartest things you can do. 

Starting to put money aside as early as possible will put you in a great place when you decide it is time to get serious about buying a home. When saving this early, you don’t need to worry about home prices, affordability or even which down payment options to consider. While it is a good idea to keep an eye on them, you don’t need to worry about the housing market or interest rates just yet. 

The point of putting away whatever money you can is to start you with a leg up when you decide you want to start considering buying your first home. 

Starting early allows you to feel closer to your homeowning goal when you feel ready to make a homebuying plan. 

When you are ready to start seriously saving for a home, your first step should be to write down a goal amount you’d like to save for. 

This number will probably look like a lot, maybe even more than you think you will be able to save. But with this number in mind, you can make a realistic savings plan for yourself. 

Then you will want to decide how many years you’d like to save before shopping for a home. To see your exact savings goals broken down, you can take the total amount you would like to save and subtract what, if any, savings you currently have and could put toward a home. After that, divide it by the number of years you’re hoping to save for. This number will be the amount you should have saved at the end of each year.  

To fully understand how much you should budget for a home, you can take your annual savings goal and divide it by 12 to see how much you will want to save each month to reach your goal. 

The amount you save will be for your down payment, closing costs and any other expenses you will have when finalizing your home purchase. 

A sample list of goals may look like the following if you don’t have anything previously saved: 

• Estimated home purchase price: $250,000 

• Down payment goal: $50,000 

• Number years to save: 5 

• Yearly savings amount: $10,000 

• Monthly savings amount: $833 

Sure, $50,000 might seem like a lot of money right now as a first-time homebuyer. But if you can break it down into yearly and then monthly increments, it will seem less intimidating. If you need to adjust further, then do so. This is just a general approach to get the ball rolling. But make no mistake about it: Setting a budget and sticking to it is a critical step toward . 

It can be hard to save for a house if you have previous debts to pay off. Recurring debt and expenses could eat up funds that could go toward saving for a home. Paying off these debts could also raise your credit score, which might help you qualify for better rates. 

Can you find a way to pay off your credit card debt or make a lump-sum payment to drastically reduce your auto loan or student loan? These are the kinds of debts that can follow you for years and prevent you from achieving a clear pathway to home savings. The lump-sum can quickly and decisively help you reduce your debt, allowing future cash flow to go toward a home savings account.  

Ask yourself: Are there any expenses that can be weeded out or somehow reduced? Is there nonessential spending that can be tamped down or eliminated? What about online purchases or those ever-expanding streaming services? If nothing else, there may be opportunities to select a less expensive cellphone plan or a basic Wi-Fi contract.  

These minor inconveniences are temporary, but the savings from eliminating or reducing a few monthly expenses or paying off old loans can help you free up money that can be transferred into your home savings account. 

There’s nothing that says you have to save for your future home while living in your current abode. Want to generate some real savings to help you buy your first home? Downsizing might help you with that. 

While it’s not always feasible for every homebuying candidate, for those who can move to a smaller, less expensive apartment or house for a couple of years, the savings can be dramatic.  

Is there a certain self-sacrifice involved in this mission? Absolutely, especially if you have a spouse and/or children. However, if you have your eyes on the prize when it comes to saving for a house and ultimately reaping the rewards of home ownership, then this temporary sacrifice in creature comforts could be worth it. 

We certainly don’t recommend this over the long term, but for a couple of years, it might benefit you to stop directing cash into your retirement accounts and instead put it into your home savings account. It’s certainly a personal choice, but in doing so, you free up funds that can quickly add up and decrease the time spent saving toward your goal.  

Some employees set 401(k) triggers at 5-10% of their paychecks, and IRA accounts max out at $7,500 ($8,600 if you’re older than 50). So, it’s pretty clear how that amount could be redirected toward your home savings account. And, of course, once you achieve your home savings goal, you can return to your retirement savings to build for a prosperous future. 

OK, you’ve doubtlessly heard a lot about side hustles and gig workers these days. The concept is not any different than what people have been doing for generations to make ends meet: getting a second or part-time job.  

While they certainly have their critics, ride-share work is the kind of hustle that might be manageable around your day job and could quickly add significant funds into the coffers to help you get aligned on your home savings goals. 

Of course, with a computer you could turn your writing or design skills into a little extra money as well. And while any side hustle almost by definition will impinge upon your free time, it will accelerate your home savings goal. 

If your current living space has some room you don’t use, you could consider renting it out to make a little extra money. 

Renting out rooms to guests is a great way to bring in extra cash for home-saving purposes. Call it the Airbnb or roommate approach. And while this concept, too, has been around for ages, digital access has made the process of both renting out rooms and receiving payment virtually seamless.  

If you reside in a safe area with easy access to public transportation and have a large enough living space for the occasional guest to come and go without affecting your home life, renting out your space could be an option.  

According to many hosts, it can be virtually painless to have a paid guest down the hall while you go about your everyday life.  

If that notion doesn’t quite appeal to you, you could consider the option of renting out your entire dwelling and go stay with friends and family for a few days. Hospitality services make it easy to customize arrangements and get that extra cash to you quickly. 

If you don’t mind permanently sharing your space with a friend or even finding someone new, you can consider getting a new roommate. Roommates can help split the cost of living with rent, utilities or even groceries. This is a great way to lower your bills and save some money. 

Don’t have the room or inclination to rent out your current home? There’s another way some people can make money when it comes to location, especially if it’s in a desirable urban area where space is at a premium: parking spaces.  

Many apartments come without a parking space, and your neighbors may be willing to pay, if you have one. This could be an extremely easy way to collect extra money, depending on the precise location and how safe and secure it is. 

There are ways to generate cash, and there are ways to cut down on expenses, but you’ll need a method for putting money into an account earmarked for your new home. That’s the role of savings. 

For example, numerous financial experts have referred to what’s known as the “latte factor” to illustrate the idea that significant savings are readily within our grasp.  

In case you’re unfamiliar with the notion, it goes something like this: Rather than forking over $5 a day on upmarket coffee, you could cut out the high-concept caffeine and instantly save over $1,800 a year.  

It sounds good in theory, but that’s not usually how people work. They like their treats and conveniences. That’s where money-saving apps come in. They can make the whole process painless and effortless.  

Essentially, there are algorithms at work that divert small increments of money from your checking account at regular intervals and move them to the app for safekeeping until you meet your savings goals. Because it’s automated, the hope is that you’ll hardly notice the activity or feel the pain but will greatly appreciate the gradual buildup of your in-app savings.   

One caveat: Many of these apps are not ideal places to save for big ticket items like homes because many do not offer substantial savings rates. So be to check around and compare offerings.  

You may also want to consider opening up a high-interest online savings account. While this sounds a tad conventional, there are some online banks that offer surprisingly high rates. Same goes for money market funds. If you already have a chunk saved, it could be a sound idea to stow some of it in one of these types of savings institutions and have it appreciate while you look for other ways to add to your home savings account.  

While there is unfortunately no single way to guarantee that you’ll master the time-honored art of home savings, these are just some of the useful ideas that can assist you when it comes to buying a house.  

When you think you’re ready, contact a savvy real-estate agent for guidance and get a better sense of how much of that savings you’ll actually need to tap into on closing day when talking to a trusted and knowledgeable loan officer. 

Loan officers can walk you through the process and help you get a head start on the mortgage process.  

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