If you\u2019ve ever saved up for a nice vacation or a car, you\u2019ve got the general idea: Spend less than you earn, and set aside the extra for the future. But because the down payment on a house is a much bigger number, you\u2019ll need to dial in your strategies a little in order to hit it.<\/p>\n
We\u2019ve run some scenarios using government data to see how you can save tens of thousands of dollars for a down payment without going insane. And as an added bonus, we\u2019ll show you how to save for your house in under three years<\/i>.<\/p>\n Before you can start saving up for your new home, you need to have a specific, actionable goal in mind.<\/p>\n Let\u2019s imagine you\u2019re part of a couple, and together you bring home $75,500 per year. That\u2019s about the median household income<\/a> in the U.S., according to HUD (the U.S. Department of Housing and Urban Development). And let\u2019s say the houses you\u2019ve got your eyes on cost $300,000 (again, not too far off from the national median<\/a> of $324,500 in 2019).<\/p>\n To account for the very real possibility that the market will have appreciated three years from now, we\u2019ll set your target price at $330,000 \u2014 10% higher than today to account for appreciation. If the market dips instead, you\u2019ll be that much better off!<\/p>\n If you\u2019re not sure how much you can afford<\/a> based on your own financial situation, check out our Home Affordability Calculator<\/a>.<\/p>\n The down payment on a new house will be your biggest expense<\/a>, by far. To get the best rates on your home mortgage<\/a>, aim to save enough to put 20% down. On a $330,000 house, that would be $66,000.<\/p>\n Not everyone can afford to save that much, and lenders know this. That\u2019s why so many people choose mortgages that allow them to put much less down<\/a>. In fact, a 2019 profile by the National Association of Realtors<\/a> said first-time buyers brought an average of 6% for a down payment. On our example home, 6% would be a down payment of $19,800.<\/p>\n If even 6% down sounds impossible, it\u2019s not. Top-selling Trussville, Alabama, agent Josh Vernon<\/a> says many of his first-time homebuyer clients have buckled down and saved impressive amounts in order to be able to buy their first home.<\/p>\n In fact, one customer paid for his whole house in cash. \u201cThis guy was 28, 29 years old\u201d \u2014 A young police officer. \u201cHe\u2019d saved every penny he had and he paid cash for his first home, which just doesn’t happen very often. All because he was smart on the front end,\u201d Vernon says.<\/p>\n On top of your down payment, you\u2019ll need to have enough cash to cover your closing costs<\/a>. These are the fees and charges associated with closing your loan. Count on 1% to 3% of the home price for these; Using our example, you\u2019d need up to $6,600.<\/p>\n In our illustration, 6% down and 3% in closing costs equals $26,400. That\u2019s 35% of what you and your partner will bring in annually over this time frame, and to reach it, you\u2019ll need to save $8,800 each year for three years. The most effective way to reach this goal is to combine a focused savings plan<\/a> with maximizing your income.<\/p>\n To get the most bang for your buck, take a look at your biggest expenditures. Here are some ideas.<\/p>\n What if you could put your current rent payment<\/a> toward your savings account instead of your landlord? To increase your savings rate, here\u2019s a drastic option: Move home with your parents for a short while. You could save up to 100% of your rent costs.<\/p>\n Too much for you? Take on a roommate or two, instead.<\/p>\n If you don\u2019t want to share your home with more people, explore some other options for cutting back on rent. Maybe move to a smaller apartment, or to a building with fewer amenities. Or consider a short-term move to a place that\u2019s more inconvenient, but cheaper.<\/p>\n If you\u2019re currently paying the U.S. median rent per month, which was $1,023 in 2018<\/a>, and you move back in with your parents, you could save $12,276 per year. You\u2019d have enough for your down payment in just over two years. If you took on a roommate and split bills instead, you could save $6,138 in a year.<\/p>\n Your next task is to take a second look at your wheels.<\/p>\n Evaluate whether you could get rid of your car while you\u2019re saving for your down payment. If you\u2019re making monthly car payments, that could be several hundred dollars a month in savings.<\/p>\n Check out your public transportation options. Carpool with your partner or a friend from work. Ask your employer about telework options. Trade the car for a bike and helmet. Or combine this strategy with the first and see if you can move within walking distance of work or public transit stops<\/a>.<\/p>\n Experian puts the average used car payment<\/a> at $400 a month ($550 if you\u2019re driving new wheels). Cutting $400 a month in car payments, $119 a month in insurance (the national average), and $90 per month in gas<\/a> (also the national average) works out to $7,308 per year in savings \u2014 and if you\u2019re walking or biking, you won\u2019t have to spend anything on public transportation.<\/p>\n Eating out eats right through your budget. But don\u2019t give up dining out altogether; Just save your meals out together for special occasions. It\u2019ll make the meal something to look forward to, and you\u2019ll be more mindful of your restaurant spending if it\u2019s an occasional habit, not a regular one.<\/p>\n \u201cIf buying a home is a real financial decision someone’s making, then making their own lunch and making coffee at home [are great ways to start],\u201d says Vernon.<\/p>\n If it\u2019s the siren call of the coffee shop that\u2019s been draining your bank account, make coffee or tea at home.<\/p>\n If you\u2019re worried about date night now that you\u2019re cutting back on restaurants, challenge yourself and your date to find low-cost or even free activities: A walk in the park, a trip to the lake, a visit to a public museum. You\u2019ll value the memories you create together.<\/p>\n Zagat, the restaurant guide, says<\/a> the average American dines out about five times a week, and also puts the average cost of each restaurant visit at about $36 per person. In that case, cutting your restaurant spending to only special occasions could save you upwards of $700 a month. That means an extra $8,400 a year toward the down payment on your new home.<\/p>\n Now that you\u2019ve examined your major expense categories, what else can you pause until you have your down payment saved<\/a>? Perhaps your gym membership, or a few of your streaming services?<\/p>\n If you have a vice or two (such as smoking or drinking), cut back or quit.<\/p>\n Skip going to the movies or buying books and make a trip to your library instead. If you haven\u2019t been there in a while, you might be surprised at the books, magazines, movies, and music you have free and instant access to. With an app like Overdrive<\/a>, you don\u2019t even have to leave your house to borrow something.<\/p>\n A smoker who goes to the movies twice a month and has an affinity for buying new novels when they come out could easily save $350 a month by changing habits. At that rate, you could see $4,200 a year added to your house fund.<\/p>\n The last component to making big deposits to your savings account is increasing your income. Probably the simplest method is to add a side gig to your evenings or weekends; Even if it\u2019s not a lot, the cash will still add up, especially if you\u2019ve made other savings sacrifices.<\/p>\n![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/how-to-save-for-a-house-in-3-years-4-666x381.png\")
<\/a>First, find out how much you need<\/h2>\n
Your down payment<\/h3>\n
Closing costs<\/h3>\n
Total cash required<\/h3>\n
![\"Two](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/how-to-save-for-a-house-in-3-years-3-666x381.png\")
<\/a>Saving strategy No. 1: Cheaper digs<\/h2>\n
Saving strategy No. 2: Take a good, hard look at your car<\/h2>\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/how-to-save-for-a-house-in-3-years-2-666x381.png\")
<\/a>Saving strategy No. 3: Learn how to cook<\/h2>\n
Saving strategy No. 4: Cut corners elsewhere<\/h2>\n
![\"Hands](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2020\/04\/how-to-save-for-a-house-in-3-years-1-666x381.png\")
<\/a>Saving strategy No. 5: Hustle up a side gig<\/h2>\n