How To Save for a House Faster and Make Your Homeownership Dreams Come True Sooner

Homeownership is one of the great American dreams. Unfortunately, it’s one that can feel entirely out of reach for many people who see saving up for a down payment as a great, insurmountable hurdle. Figuring out how to save for a house faster can feel like a full-time job!

But it doesn’t have to take years and years to save up for your dream home if you do it in a smart, strategic way. In fact, the closing date on your first house could be just a year or two away if you go into the savings process with a clear plan to follow.

We’ll map out how you can create a savings plan that both works to get you into your dream home ASAP and works for you on a day-to-day basis in the meantime.

1. Know how much you need to save!

How much you need to save for a down payment and associated expenses will depend on what type of loan you’re expecting to get.

FHA loans often require just 3.5% as a down payment, although some buyers with lower credit scores may require 10% as a down payment.

Fannie Mae’s HomeReady loan program and some other conventional loans can be approved with as little as 3% as a down payment, although 20% is required to avoid paying private mortgage insurance (PMI).

USDA loans and VA loans are popular because they offer zero percent down for eligible buyers.

According to the Federal Reserve’s Economic Data, the national median home price in Q3 2021 was $404,700.

FHA down payments for the national median home in Q3 2021 would be ($404,700 x .035 =) $14,164.50 for a 3% down payment and ($404,700 x  .10 =) $40,470 for a 10% down payment.

For a conventional home loan that requires a 3% down payment, the national median home would require ($400,700 x .03 =) $12,141, and with a 20% down payment, you’ll need to save up ($400,700 x .20 =) $80,140 for the same median national home.

Loans with a 0% down payment would obviously require no down payment, but a larger loan balance could mean higher monthly payments.

Of course, the median home price across the United States can be very different from what a house will cost in your city or state. According to World Population Review, median house prices in Hawaii and California are two of the highest, at $615,300 and $505,000 respectively, while West Virginia and Mississippi are two of the lowest, at $107,927 and $127,206 respectively.

2. Research down payment assistance

If you’re short on cash, a down payment assistance program may be your saving grace. They are designed specifically to help first-time homebuyers leverage loans and grants to cover their down payment savings shortfalls

There are thousands of these programs across the United States, although most are local, and each one has its own set of criteria you’ll need to meet.

Some of the most popular down payment assistance programs are grants that match your down payment, so if you are trying to save up a 3% down payment, you may only need to save up 1.5% yourself, and the grant will match the other 1.5%.

3. Set a budget

Now that you have a sense of what you need to save, you can make your budget to ensure you get there. Saving $12,000 for a down payment is very different from saving $80,000 — and the amount of time you expect to give yourself to save matters, too. Trying to save $12,000 in six months will look different than saving the same amount over a year.

Take the amount you want to save and divide it by the number of months, or even weeks, that you have to accrue those savings. This amount tells you how much you need to save every month or week.

Cut expenses

One of the fastest ways to save money is to look at your recurring expenses and see what you can trim down or eliminate completely.

4. Groceries

You don’t have to give up your treats in order to save money on your groceries. Sometimes, the easiest and most effective way to save money on groceries is to swap out brand name items for the store brand version.

This extends to where you do your grocery shopping, too. Swap out Whole Foods and Wegmans for ShopRite, Aldi’s, and Trader Joe’s, and you could see your grocery bill drop dramatically without a noticeable change in how your meals look and taste.

If there is something you eat a lot of, consider buying it in bulk, as bulk items generally have cheaper per-unit prices, even at regular grocery stores — Costco membership not required.

5. Rent and utilities

Do you really need such a big place, or would it be worth moving somewhere smaller (temporarily) to help you save up for a house? If you can’t move right now, perhaps you could find a roommate.

Moving to a smaller place or finding a roommate won’t just save you money on rent; it’ll also save you money on utilities. The cost of water, gas, and electricity will be lower when you have less space to heat and cool, or if you’re splitting those bills with someone else.

6. Car payments if you can

If you’re a two-car household, look into whether you can get by with one car for 6 or 12 months while you save up.

If you’ve been working toward paying off your car early, stop and put that money into your house fund instead.

If you’re already paying the minimum, look into whether refinancing your car is possible. Refinancing can lead to lower monthly payments either by extending your loan term (same money owed, but spread across more months) or by lowering your interest rate (you’re paying less money to have the loan).

You could also look into lowering your car payment by trading down to a car with more affordable payments.

7. Car insurance

Car insurance can be expensive, so see if you can reduce your rate. You can do this by checking what you’re paying for already and eliminating any coverage you don’t really need. Choosing a plan with a higher deductible and lower monthly costs could be smart if you rarely have issues.

You could also opt to bundle multiple policies under the same insurance company, such as your renter’s insurance and your car insurance. Look into low-mileage discounts if you don’t drive much, or take a safe driving course if your insurance offers discounts for doing so (many do!).

Most importantly, shop around and see which company will give you the best deal for your situation. You’ll often find it isn’t whoever you’re already paying for car insurance.

8. Eliminate any subscriptions

It’s easy to get sucked into paying for Netflix and Hulu Plus and HBO Max and  Disney+ and Spotify and Amazon Prime when each one is only a few dollars a month, but they can quickly add up.

Sit down and take a long, hard look at which subscriptions you actively use and which you use only occasionally. Cancel anything you aren’t actively using on a regular (every few days at most) basis. Pick between streaming services and cable television, if you haven’t already.

If you’re paying for Audible or Kindle Unlimited, cancel them both, and borrow audio and digital books from your local library instead.

If you have grand plans to learn a language or skill and are paying for a subscription to that platform but aren’t using it, cancel it.

9. Stay home instead of taking a vacation

Vacations are fun, but they’re also a great way to spend a lot of money in a short period of time. Instead of taking a vacation while you’re saving up for your down payment, book a staycation in your current home. You can still take the time off and do some sightseeing and adventures in your city — but you’ll save hundreds, if not thousands, of dollars on flights and hotel rooms.

If you really need a change of scenery, consider a weekend trip to somewhere you can easily drive or take public transportation to reach. Book in advance or catch last-minute deals to keep the trip from blowing your budget.

10. Pause your gym membership

Instead of paying for a gym membership, go for runs outdoors with friends or your favorite playlist.

If you prefer guided classes, check YouTube for some great yoga, aerobic, and even strength training sessions.

If you need the accountability of a trainer, ask a friend to be your workout buddy. You’ll scratch the social itch as well if you decide to work out together.

11. Refinance your student loans

Many want-to-be homeowners feel they can’t manage both their student loans and a mortgage, but the truth is you likely can do it. You may just need to refinance or consolidate your student loans first to make those payments more manageable.

You may be eligible for a better interest rate due to the market, or better credit now thanks to a longer credit history. And you may decide that extending your loan term or switching your lender will have the desired effect of lowering your monthly student loan payments, so you can put more aside for that house.

12. Stop any expensive habits (or at least press pause)

People always tell you to stop your morning (and afternoon?) coffee shop habit and put that money aside for a down payment, but indulgences like cigarettes and alcohol will put just as much of a dent in your budget, if not more. Drinking out is extra expensive, but even the bottles of beer, wine, and spirits at home will still add up quickly.

If you’re in a state where cannabis is legal, and you use it recreationally, now would be a good time to cut back or eliminate that indulgence while you’re saving up.

13. Redirect your 401(k) contributions

Another thing you can do is redirect your 401(k) contributions temporarily to help grow your down payment savings account.

Of course, if your company matches a minimum percentage, you may not want to move all your 401(k) contribution dollars over to your down payment savings account. In that case, you’re likely better off continuing to contribute whatever your employer will match and moving only what you’re currently contributing over that amount.

If you’re not contributing anything beyond what your employer matches, it may not make sense for you to redirect your 401(k) contributions at all. This is the kind of decision financial advisors are wonderful at helping you make.

14. Think about every purchase

Most of us aren’t on a strict day-to-day budget, but when you’re saving up for something big (like a house), it can be a great idea to implement one.

Kim Batterman, an Appleton, Wisconsin agent with over seven years of experience, advises her clients to watch every dollar spent, especially the ones on small day-to-day purchases.

“Before you buy anything — that cup of coffee from Starbucks, those jeans from Amazon or that burger from your local sports bar — ask yourself, ‘Do I really need this right now?’ In one day, you can spend $7 on a coffee, $90 on a pair of jeans, and $15 on a burger and a soda with tip. That is $102 you didn’t need to spend that you could have put in the cookie jar to get those down payment savings going.”

If it’s hard for you to consider every purchase or track spending, switching to spending cash can help. You’ll notice how quickly money goes out as you’ll see the evidence of your diminishing budget every time you open your wallet.

Increase your income

If you can’t cut expenses deeply enough to grow your down payment savings account fast enough, consider increasing your income to find those extra funds.

15. Find a side gig

We aren’t going to suggest you should turn your creative hobby into an Etsy shop (hobbies are for fun, after all), but you do have several good options for side gigs that can be flexible around your full-time job.

Lyft/Uber driver: If you work a normal 9-to-5, then you could both save money by not going out and earn money by driving around other people who are partying on your weekend nights.

Delivery driver: If you don’t like the idea of having strangers in your car, you could choose to deliver food to them instead.

Odd jobs: You could hire yourself out ad-hoc to help people who have one-off projects or needs through platforms like TaskRabbit, ThumbTack, or Handy.

Dog walker: Pet adoption has skyrocketed in the last few years and not everyone has the time or energy to take their dogs for regular walks. You could earn some money doing so and get a workout in at the same time.

Freelancing online: You can take a skill from your full-time job (like writing or project management) and work with freelance clients to provide the same service. You could also branch into other services, like tutoring or being a virtual assistant.

16. Ask for a raise

If you’ve been working at your job for a while and haven’t seen pay increases commensurate with the responsibilities you’re now taking on, it’s time to ask for a raise. Find your original job description and responsibilities, and figure out what you’re doing now that is above-and-beyond. That way, when you go to your boss to ask for a raise, you have a clear argument for why you deserve one.

If your pay is already in line with what you’re actually doing at work, you could take on more responsibilities and then follow the advice above.

Once you get your raise, funnel all that money into your house savings account.

17. Sell some of your stuff

Are you actually using everything in your home, or could you shed some things that are gathering dust and turn them into cash?

There are websites and apps designed to help you convert everything from clothes to electronics to furniture into cash — so, depending on what you can sell, there is an option for you that will make it relatively quick and painless.

18. Put any ‘extra’ money into savings

While it’s more fun to spend birthday, holiday, and tax return money right away, put any and all of these away into your down payment savings for now.

Getting into your dream home will be worth skipping whatever else you were going to buy instead.

19. Implement a ‘30-day’ rule

To help rein in impulse buys, think about every purchase over, say, $20, for 30 days before you buy it.

That $20 limit may be a bit low, and you may need to increase it to $50 or $100, or to drop the window to 14 days — but either way, you’ll be surprised by how many things you simply forget about wanting after a few days.

Should you also …

20. Pay off your debt?

Other finance sites recommend this, but unless you have a lower credit score and might not qualify for a mortgage unless you increase it, paying off your debt isn’t necessarily going to get you to qualify for a mortgage any faster.

You might get a better interest rate once you do qualify, but you aren’t going to qualify faster, and in the interim, the rising property prices may offset any savings from the lower interest rate.

Paying off debts first really only trumps speed if you won’t qualify for a loan for the house you want with your current debt-to-income (DTI) ratio.

Blaine Thiederman, Founder and Principal Advisor at progress wealth management regrets paying off debts over other investments, explaining, “Contrary to popular opinion, I wish I wouldn’t have paid off my student loans and auto loan as quickly as I did. The interest rate on both was nominal.”

21. Get a different savings account?

Most savings accounts offer pretty dismal interest rates and are too easy to access and plunder for impulse buys. It’s worth shopping around for the best savings account rate you can get; rates are always changing.

If you can’t find an amazing rate, at least ensure the savings account is hard to access on a whim. Sometimes the best way to do this is by keeping your savings account at a different bank than your checking account.

22. Automate your savings?

If your checking and down payment savings account are both at the same bank, you can automate your savings pretty easily. You can set up weekly transfers from your checking to your savings, or even just on the days when your paycheck hits (assuming you have direct deposit set up.)

Some banks will let you round up debit card purchases and put the difference in your savings account, so that every time you buy something, a few pennies go toward your savings. It might not seem like much, but those pennies can add up without you noticing much difference in your spending.

If your checking and savings accounts are at different banks, you can typically still set up automatic transfers between the two using a checking account’s automatic payment scheduling.

23. Ask for gift money?

If there are people who will give it to you … why not?

Friends and family who can afford to do so can gift you up to $16,000 in 2022 without you having to pay taxes on that money.

If you’re expecting any sort of inheritance, it may be a good idea to ask for it early, so it’s both tax-free and helps you reach homeownership sooner.

24. Track your progress

This can help keep you aligned.

If you’re dreading the idea of monitoring your progress, it’s probably a sign that you really need to do so in order to stay on track. You don’t need to look at it daily, but having clear goalposts and making sure you hit each one on schedule will ensure that you get to your ultimate goal of homeownership when you intended.

How fast could you save for a house if you did all these things?

Let’s say you’re saving up for the national median home, which is $400,700.

We’ll work with two scenarios — one where you are going for a conventional loan and are putting down the full 20% deposit of $80,140, and one where you’re saving for the 3% deposit of $12,141.

3% down payment scenario

You are earning an extra $150 per week from your side gig after taxes and expenses because you’re keeping it to very limited hours. That’s $600 per month, or about $5,000 this year.

You’ve eliminated $100 per month of various subscriptions, including your gym membership, and are working out at home and in the park instead. You’re saving about $1,200 this year.

You’re doing two staycations locally with friends instead of traveling abroad, saving $1,500 on each trip. That’s $3,000 total this year.

That’s $9,200 you’ve saved this year alone. If you qualify for a down payment assistance program that matches 1.5% of your down payment, you’ve already saved enough in just 12 months to more than cover your down payment, and you can put the extra toward closing costs or moving.

In this case, you could also choose to save a bit faster and sign a mortgage loan on your new home in just six months.

20% down payment scenario

If you’re saving up for the full 20% down payment of $80,140, you’ll need to find even more money to sock away.

Maybe it’s time to find a roommate or move somewhere cheaper. Slashing housing and utility costs by $200 per month could save you another $2,400 this year.

Instead of earning just $150 per week from your side gig after taxes and expenses, you work more hours, raising it to $350 per week, which would be about $17,500 this year.

Because you’re busy working more, you don’t have as much time to go out with friends for drinks or indulge in other expensive vices, saving you about $100 each week, which is about $5,000 this year.

Keeping your subscription savings and staycations the same, that’s another $1,200 and $3,000 saved this year, respectively.

All in, you’ll be able to save $29,100 in just 12 months — and that’s without making every change possible, like downgrading your car or changing your insurance. It won’t be easy to save over $80,000 in a year or two … but it is possible.

More likely, you won’t need a full $80,140 down payment to get into your new home, so you won’t need to make all these changes to get there. Pick the ones you can live with that will have the most impact and implement them. Assess how you’re doing, and make a few more short-term changes if that’s what it takes to get you into that new home sooner. And make sure to celebrate your short-term wins with a (cheap or free) reward!

Header Image Source: (Melissa Mullin / Unsplash)