Trying to purchase your own home can be challenging, owing to several factors. Firstly, if you have a low income, you’ll be more focused on paying your rent rather than trying to prepare a downpayment for a mortgage plan. Other things like inflation can also be a hindrance. However, knowing how to save money for a house the proper way can make your goal more realistic.
Even before getting married, I’ve been bent on becoming a homeowner. I consider it a huge part of my retirement plan since I wouldn’t want to spend any more money on rent as a senior citizen. Thankfully, I did get my own house! Now I’m going to be teaching you the exact steps and strategies that helped me reach my goal on time.
There’s no need to overthink it. Saving for a house is no different than saving for other long-term financial goals. So, let’s dive in and see how to pull this off.
How Much Should I Save For A House Each Month?
The amount of money you save for a house depends on your income level and the kind of house you want to purchase. Hence, ensure you determine the value of the property and the specific amount needed for downpayment. Then contribute a reasonable amount each month to complete the payment on time.
How Long Does It Take To Save For A House?
Saving for a house can take between 2 to 5 years. But being consistent with your savings goal is quite important. If you are saving money inconsistently, it would take forever to become a homeowner.
How To Save Money For A House In 7 Steps
Getting your own home within 2 to 3 years from now would be a dream come true. Here are seven steps to actualize that dream as soon as possible:
1. Set A Timeline
If you don’t have the money to buy your home outright, the best place to begin is to determine a realistic timeline for when you intend to make the purchase. Now this timeline depends on your income and how much you put down every month. But more importantly, you need to make sure that you’re not overwhelmed by the timeline. So, it’s important to be realistic.
For example, a newly wedded couple can decide to get a home within two years before trying to raise kids. That’s a realistic goal. If you already have kids, two years may not be realistic. It may take longer. But the important thing is to remain consistent with your savings.
2. Automate Your Savings
Once you have set a realistic timeline, the next thing is to start saving. It can be 20% of your monthly income.
After you have determined how much you want to put down every month, it’s advisable to automate your savings. You can choose weekly or monthly deductions without having to worry about forgetting to save.
There are several simple mobile financial apps you can use to automate savings. Find one and link it to your savings account.
3. Don’t Be In Haste
Except you are a millionaire who’s able to buy a house instantly, cut yourself some slack. Don’t rush.
Buying a house takes time, and if you don’t understand this, you may not appreciate the little efforts you’re making. So, don’t give in to the pressure that you need to move into your own place immediately.
Remember you have other bills to pay. Besides, you still have to pay rent in the apartment you currently live in. You must give yourself a healthy amount of time to reach your goal.
4. Choose Affordability
While trying to figure out how to save money for a house fast, always choose an affordable option. This way, you can pay up sooner.
Rather than look for something luxurious, be comfortable with buying a home that’s modest and comfortable. At the end of the day, what you actually need is a decent home for you and your family. You don’t need to live in a mansion like the Kardashians.
5. Reduce Your Living Costs
One of the best strategies to save for a house is cutting down on your expenses. You have to start living below your means. Don’t compare yourself to others. The money you get from reducing your spending will be put toward the savings for your home.
For example, if you are used to eating out and subscribing to premium services you rarely use, it’s time you canceled that habit. Being frugal will help you get your home faster since you’ll be saving more money in the housing fund.
6. Have More Than One Stream Of Income
If you must know how to save money to buy a house, consider increasing your income. You may have to get another job or look for a profitable side business that brings extra money every month.
Interestingly, there are various things you can do right now aside from your main job. From affiliate marketing to dropshipping, the internet keeps providing more opportunities to earn an income without investing too much time and money.
7. Consult A Real Estate Agent
Aside from learning how to save money for a house, you also need insight into how the real estate market works. This is important in order to find an affordable house with enough value for your money. Hence, you should consider speaking with a real estate agent. You can describe your dream home and wait to see the options they have for you.
How To Save For A House In 2 Years
If the timeline you’ve set to own a home is 2 years, bear in mind that your goal is not far-fetched. Here are some strategies for how to save for a house in 2 years:
1. Determine Your Down Payment
A down payment for a home is a small percentage of the total cost of the property. In some cases, you can be allowed to put down about 3.5% of the total cost of the house you’re interested in purchasing.
After this initial payment, you can move into your new home and continue with the mortgage payments every month. However, it’s recommended to save around 20% of the total cost of the house before proceeding with the purchase.
If the down payment is substantial, it will be easier to pay off the rest over time.
2. Know The Specific Figure
This is one of the top tips on how to save for a house. While trying to figure out the percentage of the down payment, it’s best to know the exact amount of money you need to put down.
Aside from speaking with a real estate agent, you can research home prices on your own. For example, if the house you hope to buy costs $200,000, 20% of that is $40,000. So, the next step is to determine how long it would take you to save 40 grand.
If you save $2,000 every month, you can achieve this in less than 2 years. If you save $1,500, it would take you 27 months to get $40,000. Just make sure you choose a realistic savings plan.
3. Use A Money Market Account
While saving money for your down payment, it’s important to use an account without risks. You need a safe short-term account that allows you to easily access your cash when you’re ready.
I would recommend an online money market account that allows withdrawals after 3 to 6 months. Don’t forget that you will accrue interest on your savings too.
Nevertheless, before choosing any money market account, be certain that you understand all of the restrictions and rules surrounding it. You don’t want to be unpleasantly surprised when it’s time to gain access to your funds.
4. Take Advantage Of Windfalls
Do you know what it means to capitalize on windfalls? It’s simple! Windfalls are the extra money you earn aside from your regular monthly income. This could be a bonus at work, a cash gift, a tax refund, and other cash you don’t usually expect.
So instead of seeing windfalls as an opportunity to spend money lavishly, save it! Ignore the temptation to shop online, dine out, or splurge cash on irrelevant purchases. Direct most of your windfalls toward your housing fund. That’s how to save money for a house faster.
5. Reduce Retirement Savings
I should begin by assuring you that this is only going to be temporary. It’s okay to pause your retirement savings and continue later. It’s a sacrifice you have to consider if you want to get your home sooner. As of 2024, the retirement account contribution limit is $6,500 for an IRA and $22,500 for 401(k) plans.
If you usually max out your retirement contributions to your IRA or 401(k) plan, one year may be enough to build a down payment by saving most or all of that cash. Once you make that initial payment for your home, you can continue saving money in your retirement fund.
Many people who have figured out how to save money for a house used this particular strategy.
How To Save For A House While Renting
If you’re trying to purchase a home for the first time, it’s safe to say that you currently live in a rented apartment. Here are some of the brilliant techniques on how to save for a house while renting:
1. Move To A Smaller Apartment
Moving to a smaller apartment may not seem like the perfect decision, but you need to ask yourself the big question: would you rather live in a large apartment or move into a smaller space and become a homeowner a few years down the line?
You certainly prefer the latter. When you move into a smaller apartment, you spend less money on rent. This will then enable you to contribute more money to your housing fund. This is one of the simplest yet efficient tips on how to save money for a house. You should consider it.
2. Pay Off High-Interest Debt
While looking for ways to save money for a house, you have to be focused on freeing up money to increase your savings. One way to do this is by paying down debt with high interest, especially credit cards.
Once you no longer have to make any debt payments every month, you’ll be able to conveniently save money for the down payment for your home.
On the other hand, you can easily qualify for a mortgage if you aren’t owing too much debt. This is a piece of important information to keep in mind as you learn how to save money for a house.
3. Create A High-Yield Savings Account
While stashing money somewhere, it’s a good idea to make sure your savings bear interest.
I would recommend opening a high-yield savings account to help you earn extra cash on your contributions. This account is also important because it allows you to grow your money risk-free.
When you get windfalls, you can store the extra money in your account. It will give your savings an extra boost, bringing you closer to your goal.
4. Explore Rent-To-Own Options
Have you heard about rent-to-own opportunities? This is when you rent a home for a few years before buying it.
When choosing a rent-to-own home, you get two agreements most times. The first one is a lease: renting the house for a set period of time instead of paying monthly. The other option is to buy the home before the lease expires.
If you can’t afford a home yet, this is one of the best decisions you can make. It allows you to lock in the house you want while you’re yet to purchase it.
5. Work With A Budget
You can’t learn how to save money for a house without knowing how to budget your income. Budgeting is a basic financial strategy that helps you to spend wisely and save money for your goals. You can also monitor your spending to ensure that you’re not living beyond your means. There are various budgeting strategies you can start using to manage your money.
For example, the 50/30/20 rule is perfect for almost any financial situation. This strategy entails splitting your income into three ways: 50% should be spent on your needs (rent, food, utilities, etc), 30% on your wants, and 20% on your savings or debt payments. Sometimes, you can adjust the percentages depending on your needs and income level.
Recap: How To Save Money For A House
Looking for the fastest ways to save for a house can be overwhelming, especially if you are not rich. You’ll constantly be worried about how to sort your bills, pay down debt, and of course, contribute money to your housing fund. However, by working with the right strategies discussed here, you can become a homeowner someday.
If you have a low income, make sure you find ways to earn extra money. You can’t save for a house and pay your bills at the same time if you aren’t earning enough money.
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