How to Save for a House
Do you dream of owning your own home someday? Perhaps you see yourself in a storybook cottage with a white picket fence or maybe a sleek urban condo. Whatever you imagine your home to be, the time to start planning — and saving — is now.
Buying a home is the single largest purchase you’ll ever make. The cost of homes, especially in our region, can be pretty daunting. While a 20 percent down payment is standard, there are several programs available in which you can put 15, 10, and even five percent.
Whatever the list price of your dream home (and down payment), you’ll need to save some serious cash. Below are our best tips on how to save for a house.
How to Save for A House
1) Use technology to make saving less painful. We can’t stress this enough: automate your savings. If you don’t need to take any action to move money into savings, it’s much easier (and you probably won’t even notice!). Take advantage of apps like Qapital or Acorns, which round up change to nearest dollar and move that money into savings. Acorn even gives a one percent savings bonus every three months.
Allison recommends creating a separate bank account that is not tied to your regular accounts so you aren’t tempted to move the money. Put a certain amount in that account automatically from your paycheck and watch it grow! Re-visit the amount every three months to see if you can increase it.
Or, go the old fashioned route. Every time you receive a $5 bill (in change from a store, for example) save it! Also, save all of your change – you’ll be surprised how quickly it can add up.
2) Use cash. While we’re on the subject of cash….stop using your credit cards and try to only use cash for your purchases. It’s much harder to part with cold, hard cash. You’ll think twice about whether you really need those new shoes when you have to hand over a $100 bill for them.
3) Hold off on saving for retirement. CAVEAT: We only advise this strategy if you’re in your twenties and actively contributing a percentage of your income to a retirement plan (a 401(k) or IRA plan). You can temporarily divert that money to your savings for a down payment. Make sure if you go this route that it is a short-term plan with a clear end date.
4) Bank those windfalls. Think inheritance money, tax refunds, raises. While it may be tempting to buy something fun with a windfall, resist the urge and head straight to the bank!
5) Let your family and friends know you’re saving. You may receive some birthday gifts of cash to support your dreams of homeownership. Your friends will be more understanding when you opt out of an expensive night on the town.
6) Think Small. Here are some other small ways to save for a house. Cutting these expenses may not seem like much but taken together over time, they will add up!
- Cancel your cable
- Sell unwanted items (eBay, yard sale, etc)
- Pack your lunch. Drink more water and less soda, coffee, fancy seltzers
- Make your coffee at home
- Cancel gym memberships (exercise outside!)
- Work overtime, start a side business, or get a second job
- Buy generic items
- Limit entertainment expenses
- Use your local library instead of buying books
- Make and use shopping lists (and coupons!)
The Bottom Line
With some simple adjustments, you CAN easily save for a downpayment and achieve your dreams of homeownership. With discipline and taking advantage of technology, you will see your saving grow more quickly than you could have imagined.
Be sure to download our guide for first time home buyers today.
If you’re wondering how to save for a house and become a homeowner, let us know. We’d be happy to walk you through the process, no matter how early it is.