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Jun 24, 2024

How much to save for a house

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three illustrated house frames filled with coins

Buying your first home is a significant milestone. It’s also a significant expense, one that feels formidable for many people. But with a solid sense of the costs and a smart saving strategy, you can work toward your goal bit by bit until you finally have the keys in your hand. Whether you dream of a cozy cottage or a sleek condo, understanding the costs involved and planning accordingly can make your dream more achievable.

Here’s what we’ll cover:

The cost of buying a home: a breakdown

When people start thinking about how much to save for a house, they usually have two key numbers in mind: the list price (the full cost of the home itself) and the downpayment (the cash you’ll have to shell out upfront). But there’s actually quite a bit more to it than that. Understanding the various expenses involved in purchasing a home can give you a realistic idea of how much cash you need in hand to make a purchase. The more familiar you are with these costs, the better you’ll be able to plan and avoid unpleasant surprises. 

Down payment

The down payment is usually the biggest expense when you buy a home. While conventional advice is generally to put down 20% of the home’s purchase price, that’s often not practical for first-time buyers. The good news is that a 20% down payment isn’t usually required. Depending on your credit score, income, and location, you may need to put down far less. According to the National Association of Realtors, the average down payment was 13.6% in the first quarter of 2024, and many first-time homeowners put down as little as 3.5% with an FHA loan.  

There are also government programs that can reduce your down payment to as low as 0% in certain circumstances if you qualify:

  • VA loans are designed for veterans, active-duty service members, and certain members of the National Guard and Reserves, offering benefits like no down payment and competitive interest rates. 
  • USDA loans are geared toward individuals in rural areas and provide low-interest rates and zero down payment options for those who meet the income eligibility requirements.

While going for the lowest possible down payment may mean that you can buy a house sooner, keep in mind that it can cost you later in a couple of ways. First, a lower down payment usually means you’ll have higher monthly mortgage payments, since the total amount of your loan is spread across a fixed mortgage term (usually 15 to 30 years). And many lenders require you to carry private mortgage insurance (PMI) if you put down less than 20%. PMI is an extra cost added to your monthly mortgage payment, usually around 0.5% to 1% of the loan amount. Lenders may require it to protect themselves in case the borrower defaults on the loan.

Home inspection costs

Before finalizing a home purchase, most buyers get a professional home inspection to ensure the property is in good condition. The costs for a home inspection vary depending on the location and size of the home, but typically range from $300 to $500. Inspections are usually done after your initial offer has been accepted by the seller but before the deal is finalized. 

An inspection can alert you to problems that need to be fixed; you may need to make room in your budget for those repairs once you take possession of the house. On the plus side, you may be able to use information from the inspection to negotiate a lower price if any issues or repairs are identified, or ask the seller to pay for those repairs prior to closing.

Closing costs

When you’re calculating how much to save for a house, you’ll need to be aware of closing costs. Buying a house is different from other kinds of purchases because multiple parties are involved: not just you and the seller, but real estate agents, mortgage brokers and banks, attorneys, and government agencies. Closing costs refer to the fees associated with finalizing a real estate transaction, which typically range from 2% to 5% of the home’s purchase price; that can come out to several thousand dollars. 

Common closing costs include:

  • Title search and insurance: Costs to verify property ownership and protect against title disputes
  • Attorney fees: Payments for legal services during the real estate transaction
  • Application fees: Charges for processing a mortgage or loan application
  • Loan origination fees: Costs associated with creating a new loan
  • Appraisal fees: Payments for determining the property’s market value
  • Property taxes: Annual taxes paid to the local government for property ownership
  • Escrow fees: Costs for managing the escrow account during the real estate transaction
  • Homeowners insurance: Premiums to protect the property against potential risks
  • HOA fees: The dues charged by a homeowner’s association
  • Real estate agent fees: The money the buyer’s and sellers’ agents charge for facilitating the sale

Typically, the seller pays the fees for both your and their real estate agent, but it’s worth checking with your realtor, as sometimes you’re expected to pay your agent’s fees yourself. You may also be able to negotiate with the seller to cover some or all of the closing costs.

Stash 100 tip: Don’t overlook closing costs, which usually range between 3-5% of the purchase price. Example: if you want to make a 10% down payment, you’ll need between 13-15% of the purchase price in cash to complete the transaction. For a more exact estimate use a closing cost calculator specific to your state. Don’t forget moving costs.

Moving expenses

Once you’ve signed the paperwork and gotten your brand-new house keys, you’ll need to actually move in. That process comes with its own set of costs, so it’s worth factoring in when you determine how much to save for a house.  

Hiring professional movers, renting a truck, or even just buying packing supplies can add up quickly. Some people need to rent a storage unit to keep some things in during the moving process as well. Depending on the distance and amount of stuff you own, moving expenses can range from a few hundred to several thousand dollars. While you can save money by doing all the heavy lifting yourself and sourcing free boxes, you’re still likely to run into a few expenses. 

In addition to moving your stuff, you’ll need to set up utilities at your new house. There’s often a cost to get your electricity, water, gas, trash, internet, cable, and other utilities up and running at your new home. The cost varies based on where you live and the services you use, but you can call utility companies ahead of time to find out how much money you’ll need to budget.

Initial repairs and improvements 

Once you’ve moved in, you may want to make some improvements or buy new furniture to make your new house feel like home. If your home inspection revealed anything in need of immediate repair, your real estate agent may be able to get estimates from local contractors for you before closing so you know what to expect. You’ll also want to consider appliances. As a renter, appliances are usually furnished by your landlord, so you may not be bringing a fridge, air conditioner, or washer/dryer with you. Confirm with your realtor whether there are any appliances in the home that will not be included when you purchase your new house; that way you can research prices ahead of time. 

Costs for repairs, improvements, appliances, and furnishings can vary widely. Setting aside a few thousand dollars for these initial expenses can ensure you’re not caught off guard.

Unexpected expenses

While you can identify most of the costs you’ll encounter when you buy your first house, it’s wise to expect the unexpected. A sudden plumbing issue, a computer broken during your move, damages to your old rental, or any other unplanned expense can be tough to manage when you’ve just purchased a house. That’s why it’s advisable to have a healthy emergency fund in place before you become a homeowner. And to ensure you have that safety net, don’t drain your emergency fund to pay for your home purchase.  

Calculate how much you need to save for a house

With an awareness of all the various costs involved in buying your first home, you can start to calculate how much money you need to save up before you begin your adventure as a homeowner.  

Understand how much a house will cost

The more specific you are in setting your savings goal, the more effectively you can budget for it. So start by finding out the actual price range of houses that you’d like to buy.  

Even if you see your first house as a starter home that you’ll move on from in the future, you’re likely going to live there for many years. So it’s important to find a house that meets your needs. At the same time, how much you can save for a house on the timeline you want might call for some trade-offs. Consider a variety of factors and prioritize the aspects of a house that are most important to you. 


  • Proximity to work or school: Consider how the location of a new house will affect your daily commute and work-life balance.
  • School districts: If you have children or plan to, the quality of nearby public schools may be a high priority.
  • Community and neighborhood: Weigh the importance of things like neighborhood crime rates, proximity to friends and family, and the community amenities that matter most to you. 

Size and layout

  • Number of bedrooms and bathrooms: In addition to the number of people who will live in the house, determine if you need separate rooms for things like a home office, and whether you anticipate having other household members in the coming years, like roommates, children, or other relatives.
  • Square footage and floor plan: Explore the kind of floor plans you prefer as well as how much space you need to be comfortable. Keep in mind that open concepts versus segmented rooms can make a difference in how large a house feels. 
  • Lot size: If you’re looking for a single-family dwelling, mull over how much outdoor space you need. If you have or plan to have pets or children, you may want a lawn or garden, but you’ll also have to spend time or money to maintain it.

Condition and age of the home

  • New construction vs. older homes: Newer homes might mean fewer immediate repairs, but quality can vary depending on the builder. Older homes may have charm but potentially require more maintenance.
  • Renovation needs: Think about whether you’re willing and able to do renovations. Buying a fixer-upper can save you money initially, but be sure you have the resources to either DIY or hire contractors later.  

Future plans

  • Resale value: Consider the long-term investment potential of the property. It takes time to build equity in a house, so think about how long you expect to stay in your first home and the features of a house that affect your ability to come out ahead if you sell your house in the future. 
  • Family and lifestyle changes: Reflect on your long-term plans, such as growing your family, caring for aging relatives, and advancing your career. These factors can play a big role in the location, size, and features you most value in your house.

With a clear idea of what you really need in a house, as well as what’s just a nice-to-have, you can start searching real estate listings to see the cost of homes that meet your criteria. This will help you get a more realistic idea of how much to save for a house. 

Evaluate your financial situation 

Once you have a clear idea of all the expenses associated with buying a house and the price range of houses that meet your needs, it’s time to examine your finances. Take a close look at your income, expenses, debts, and existing savings. If you don’t yet have a monthly budget, now may be the time to start budgeting so you can be more intentional about saving. If you’re going to buy a house with a partner, you might want to start budgeting as a couple so you can work together on your shared goal. 

This could also be a good time to take stock of your debt and credit score. If you have credit card balances, you may want to make a plan to pay off high-interest debt so that mounting interest isn’t undermining your ability to save. And since your credit score can affect both your mortgage interest rate and how much down payment a bank will require, you could start taking steps to improve your credit score now.  

Set a realistic savings target and timeline

Once you have a clear understanding of your finances, set a realistic savings target based on the desired home price. Use the house price point you’ve identified and the list of purchasing costs above to calculate how much money you need to save for a house. Then determine how much you can put aside each month in order to find out how long it will take you to reach your goal. 

This example illustrates how you could set your target and timeline:

  • Determining a savings target: Say you’re aiming to buy a $300,000 house with a 15% down payment of $45,000; you also plan to save up $10,000 for closing costs, moving, and other home-purchase expenses. That would come out to a savings goal of $55,000. 
  • Calculating the timeline: Now review your budget to determine how much you can save for a house each month and how long it will take to reach that goal. For instance, if you can afford to put aside $1,000 a month, it will take you just over four and a half years to reach your $55,000 goal. 

Practical ways to save for a house

Determining how much to save for a house can leave you a bit overwhelmed; it’s usually a pretty big number, and it can take a long time to reach it. Being diligent about putting aside money every month can help you get to your goal of saving for a downpayment. But you might want to hit your target even sooner, and there are practical steps you can take to boost your savings strategy. 

Automate your savings

One of the easiest ways to make sure you stick to your savings plan is to automate it. Set up automatic transfers from your checking account to a dedicated savings account each month. This ensures you consistently save without even thinking about it, and it removes the temptation to spend the money. You can even ask your employer to put some of your direct deposit into your savings account each month so the money never even lands in your checking account. 

Trim your expenses

Find ways to save money so that you’re spending less and saving more. Review your monthly expenses and identify areas where you can cut back. You might even think about reducing your current housing costs if possible by getting a roommate or moving to a less expensive rental. 

Increase your income

Boosting your income can give you more money to put into your savings. You might want to pick up a side hustle or look for passive income opportunities. And when you come into a windfall, like a bonus at work or a tax refund, add it to your house savings instead of spending it.  

Put your money to work

Your house fund will grow faster if your money is earning interest and returns. So don’t tuck your savings under your mattress. Instead, put your money into low-risk short-term savings and investment vehicles that will help you earn more interest and returns. 

Determine how much to save for a house and start working toward your goal

Saving for a house is a significant goal, but it can be achievable. By fully understanding the costs involved, evaluating your financial situation, and implementing practical saving strategies, you can make your dream of homeownership a reality. And remember, when you determine how much to save for a house, you’re making a plan to strengthen your financial future: owning a home that you appreciate living in while it can appreciate in value.

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Written by

Tara Blaine

Tara Blaine draws on over 20 years of experience as a writer to translate seemingly complex financial ideas into insights readers can put to work in their everyday lives. She’s written personal finance education materials for numerous institutions, helping customers learn smart techniques for budgeting, overcoming debt, saving money, and planning for their long-term financial health.


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