Housing Finances How to Save for a House in 8 Steps Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint Published Oct 13, 2020 - [Updated Dec 22, 2021] 7 min read Sources Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. When you buy a home, you’re making an investment in yourself and your future. You’re building financial stability, equity, and experience. You have a place to call your own and you can customize the space just how you want. Yet, you might be wondering how to get to that point — this is why saving up is so important. There are some upfront costs to owning a home — primarily a down payment. Find out how much you should budget using a home loan affordability calculator and figure out how to save the amount you need. After all, the best way to save for a house is to formulate a budget that helps you work towards your house saving goals step by step. Soon enough, you’ll be turning the key and stepping into a home you love. Step 1: Calculate Your Down Payment and Timeline When figuring out how to save for a house, you may already have a savings goal and deadline in mind. For instance, you may want to save 20 percent of your home loan cost by the end of the year. If you haven’t given this much thought, sit down and crunch the numbers. Ask yourself the following questions: What is your ideal home cost? What percentage would you like to contribute as a down payment? What are your ideal monthly payments? When would you like to purchase your home? How long would you like your term mortgage to be? Asking yourself these questions will reveal a realistic budget, timeline, and savings goal to work towards. For instance, say you want to buy a $250,000 house with a 20 percent down payment at a 30-year loan term length. You would need to save $50,000 as a down payment; at a 3.5 percent interest rate, your monthly payments would come out to be $898. Step 2: Budget for the Extra Expenses Just like a new rental, your home will have fees, taxes, and utilities that need to be budgeted for. Homeowners insurance, closing costs, and property taxes are a few examples of cash expenses. Not to mention, the cost of utilities, repairs, renovation work, and furniture. Here are a few more expenses you may have to save for: Appraisal costs: Appraisals assess the home’s value and are usually ordered by your mortgage lender. They can cost anywhere from $312 to $405 for a single-family home. Home inspection: A home inspection typically costs $279 to $399 for a single-family home. Prices vary depending on what you need inspected and how thorough you want the report to be. For instance, if you want an expert to look at your foundation, there will likely be an additional cost. Realtor fees: In some states, the realtor fee is 5.45 percent of the home’s purchase price. Depending on the market, the seller might pay for your realtor fee. In other places, it might be more common to contract a lawyer to look over your purchase agreement, which is usually cheaper than a realtor. Appraisal and closing costs: Appraisals assess the home’s value and are usually ordered by your mortgage lender. They can cost anywhere between $300 and $400 for a single-family home. Step 3: Maximize Your Savings Contributions Saving for a new home is easier said than done. To stay on track, first create a savings account that has a high yield if possible. Then, check in on your monthly savings goal to set up automatic contributions. By setting up automatic savings payments, you may treat this payment as a regular monthly expense. In addition to saving more, spend less. Evaluate your budget to see what areas you could cut down or live without. For instance, creating your own workout studio at home could save you $200 a month on a gym class membership. Step 4: Work Hard for a Raise One of the best ways to boost your savings is to increase your earnings. If you already have a job you love, put in the extra time and effort to earn a raise. Learning new skills by attending in-person or virtual training seminars or learning a new language could increase your earning potential. Not only could you land a raise, but you could add these skills to your resume. Sometimes, putting in the extra effort doesn’t always land you a raise, and that’s okay! When getting a raise is out of the question, consider looking at other opportunities. Figure out which industry suits you and your skillset and start applying. You may end up finding your dream job, along with your desired pay. Step 5: Create More Streams of Income Establishing different income streams could help your house savings budget. If one source of income unexpectedly goes dry, having other sources to cut the slack is helpful. You won’t have to worry about the sudden income change when paying your monthly mortgage. For example, creating an online course as a passive income project may earn you only $5 this month. As traffic picks up, your monthly earnings could surpass your monthly income. To create an abundant financial portfolio, there are a few different ways to do so: Create an online course: Write about something you’re passionate about and share your skills online. Sell your digital products on Etsy or Shopify to earn supplemental income. Grow a YouTube channel: Start a YouTube channel and share your skills to help others within your industry of expertise. For instance, “How to start a YouTube channel” could be its own hit. Invest in low-risk investments: From CD’s to money market funds, there are a few types of investments that could grow your cash with low risk. Step 6: Pay Off Your Biggest Debts Before taking on more debt like a mortgage, it’s important to free up your credit usage. Credit utilization is the percentage of available credit you have open compared to what you have used. If you have $200 in debt, but $1,000 available on your credit card, you’re only using 20 percent of your credit utilization. A higher credit utilization could potentially hinder your credit score over time. Not only can paying off debts feel satisfying, but it could also increase your credit score and prepare you for this next big purchase. To pay off your debts, create an action plan. Write out all your debt accounts, how much you still owe, and their payment due dates. From there, start increasing your payments on your smallest debt. Once you pay off your smallest debt in full, you may feel more motivated to pay off your next debt account. Keep up with these good habits as you take on your mortgage account. Step 7: Don’t Be Afraid to Ask For Help Whether your touring homes or want help adjusting your budget, don’t hesitate to ask for help. If you’re trying to figure out what your budget should look like, research budgeting apps like Mint to build a successful financial plan. If you’re curious about additional mortgage expenses, your budget, or investment opportunities, reach out to a trusted professional or utilize government resources. Not only are they able to help you prepare for your next big step, but they could also help you and your finances in the long term. Step 8: Store Your Savings in a High Yield Saving Account While you may have a perfect budget and a home savings goal, it’s time to make every dollar count. Before you add to your account, research different savings accounts and their monthly yields. The higher the yield, the more your savings could grow as long as your account is open. In September of 2020, the national average interest rate on savings accounts was capped at 0.8 percent. If you were to deposit only $100 into a high yield savings account with an APY of 0.8 percent, you could earn $80 off your investment over the year. This helps you save extra money by just putting your money into a savings account. In Summary First, set a savings goal to match your estimated down payment and mortgage monthly payments. Then add your contributions to a high yield savings account to grow your money overtime. Don’t forget to budget for extra mortgage expenses like appraisal costs, home inspections, realtor fees, or closing costs. Keep in mind, your monthly utilities and fees may also be more expensive than your current living situation. Prepare for the additional costs by increasing your earning potential and optimizing additional income stream opportunities. Free up your credit utilization by paying off as much debt as possible before buying a house. Keep up these good habits throughout the length of your mortgage term. When you purchase a home, you’re building a piggy bank for your future. Every month you pay your mortgage, you pay part of it to yourself because you own the home. Instead of paying rent to someone else, you reap your own investment when you sell. Most importantly, though, you’ll have a place that’s truly your own. Previous Post Mint Celebrates World Mental Health Day with Happy Money Next Post 9 Ways to Support Small Businesses Without Breaking the Bank Written by Mint Mint is passionate about helping you to achieve financial goals through education and with powerful tools, personalized insights, and much more. More from Mint Sources : Interest Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! 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