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Jul 9, 2024

How to save for a house: from dream to reality

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illustrated house frame being filled with coins similar to piggy bank.

Going from renter to first-time homeowner is a milestone that many people dream of achieving.  Yet a tight real estate market and rising housing costs can make it feel overwhelming. But just because you don’t have a down payment in the bank right now, you don’t have to give up on your dream. To save for a house, you’ll need a strategic plan and strong commitment. The sooner you start, the sooner you’ll be holding the keys to your very own home.   

Here’s what we’ll cover:

Get clear on your goal and timeline

First things first, what type of home are you looking for? Whether it’s a cozy condo or a spacious family house, defining your home purchase goals will set the stage for the rest of your savings plan. 

House type and features

Consider the size, type, and features of the home you want, and do a bit of research to learn what houses of that kind are selling for. Make a list of your priorities, including must-have features and the niceties that you’d like but don’t have your heart set on. That way you can zero in on the kind of houses that meet your needs and know what trade-offs you’re willing to make when finding a house you can afford. 

Preferred location

The location of your dream home significantly impacts its cost. In many cases, urban areas tend to be pricier than suburban or rural locations. Think about your lifestyle, work commute, and amenities you need nearby. Also consider how close you want to be to family and friends. Browse real estate listings in neighborhoods you’d like to live in to get a sense of house prices in those areas. 

Timeline for saving 

When setting financial goals, determining your timeline is essential to making a concrete savings plan. If you want to purchase a house within a year, you’ll need a different strategy for that short-term goal than if you have a mid-term goal of buying within five years. Think about the circumstances that influence your timetable. For instance, some people have time-sensitive reasons for moving, like a career milestone or family needs. In other cases, you may have more flexibility on when you need to reach your goal.   

Calculate how much money you need to save

When you’re looking at home prices, it can be tough to know exactly how much to save for a house. Understand all the costs involved, including how much you need for a down payment, in order to set a specific savings goal. 

Down payment and other costs

Your down payment is the amount of money you put down upfront when you buy a house. Typically, a down payment ranges from 5% to 20% of the home’s sale price. That’s a pretty large range, so you’ll need to get a sense of what size down payment makes sense for you. A larger down payment often means you can get a lower interest rate on your mortgage and may eliminate the need to get private mortgage insurance (PMI), and it also may allow for a lower mortgage payment. On the other hand, going with a smaller down payment means you could meet your savings goal sooner. 

Keep in mind that your down payment isn’t the only cost you’ll have. To determine exactly how much to save for a house, factor in other expenses like home inspections, closing costs, moving expenses, and repairs. 

Total amount to save

Determine the average price of a house with your preferred features in your desired location. Then calculate how much you’ll need for a down payment. For example, if you’re eyeing a $300,000 home, you might need $15,000 to $60,000 for a down payment. You’ll also want to estimate how much you’ll need for all the other expenses required; you may want to talk with a real estate agent to get specifics for your area. Add up all these costs to estimate the total amount you’ll need to save for a house.

Loan options and requirements

Different mortgage types come with various requirements. Familiarize yourself with options like fixed-rate mortgages, adjustable-rate mortgages, and government-backed loans. Each has its pros and cons, and your credit score and income will play significant roles in determining your eligibility. Consider talking with a mortgage broker or a bank loan officer to learn the options available to you. Use this information to adjust your savings goal and timeline as needed. 

Assess your financial situation

When determining how to save for a house, you’ll need a picture of your financial landscape. This information will allow you to make a savings plan that works for your situation. 

Income and expenses

Start by adding up all your monthly income, including your take-home salary and money you earn from any part-time jobs or side gigs. Also take into account any income you receive from things like child support or government programs. 

Next, understand how much you spend each month. Tally up your necessary expenses, like rent and utility bills, as well as how much you spend on discretionary things such as entertainment or travel. You might want to review your bank and credit card statements from the last year to be sure you’re accounting for all expenses. 

Compare your income to your expenses to see how much you could save for a house every month. If you’re spending less than you earn, the excess money can go into your house fund. But if you find that you tend to live beyond your means, you’ll need to make some adjustments in order to save up for your home-buying dream. 


When you take out a mortgage, you’re going into debt. Before you take the plunge, get a handle on any debt you already have. Make a list of all your outstanding debts, such as student loans, car loans, and credit cards. Note the balance and interest rate for each of your debts.

If you’re carrying high-interest debt, you might want to prioritize paying it off in order to more effectively save for a house. Mounting interest can undercut your ability to save, and wind up costing you more money the longer you hold the debt. Your amount of debt can also impact your credit score and affect how much a bank is willing to loan you for a mortgage. Because credit cards often have particularly high interest rates, you may want to focus on paying off your credit cards. Consider using the avalanche method or snowball method to reduce your debt.   

Credit score

Your credit score is one of the primary factors a bank considers when you apply for a mortgage. The higher your score, the more likely you are to get a better interest rate and be approved for the loan amount you need. If you haven’t established much credit yet, you might want to build your credit through smart use of credit cards or credit-builder loans; just be sure you’re not racking up debt and interest by carrying balances. And if you have a low credit score, take steps to improve it now so you’ll be in a better situation when it’s time to purchase your home. 

While you’re saving for a house, keep an eye on your credit to make sure no issues are causing your credit score to drop. You can get a free credit report each year and check it for potential problems like fraud, inaccuracies, or activities that are lowering your credit score. You might also want to use a credit score app to track how your score changes over time. 

Finally, be sure to pay your bills on time so that your credit score doesn’t take a hit. Set up automatic bill pay so you don’t forget to make timely payments. 

Create a savings plan

Once you know your goal and financial picture, you can lay out a concrete plan to save for a house. 

Monthly savings target

Start by breaking down your savings goal into the specific amount you’ll need to save each month in order to reach it in the timeframe you have in mind. Divide the total amount you need by the number of months you plan to save. For instance, if you need $50,000 and plan to reach that goal in five years, you’ll need to save about $833 per month. If your income fluctuates, plan for months with higher or lower earnings. 

Monthly budget

If you don’t already have one, create a budget for your monthly expenses and savings. This allows you to plan for how you’ll spend your income and add to your house fund over time. There are multiple budgeting strategies that can help you manage your money and save for a house, such as the 50/30/20 rule, the envelope method, and zero-based budgeting

Once you have a budget in place, track your spending carefully to ensure you’re sticking to it. You may find that you need to adjust your budget over time to account for changes in your lifestyle or income. Consider having a monthly “budget date” with yourself to review your finances and modify your budget as needed. 

Automated savings

To help you stick to your savings plan, automate your savings habit. Set up an automatic transfer into your savings account each month so you’re funneling money into your house fund without even having to think about it. If your employer offers direct deposit, you can even have them put a portion of your paycheck into your savings account so that you’re never tempted to spend the money you’re saving for a house. 

Another handy way to automate your savings is to use your bank’s online tools to boost your savings. For instance, many banks offer a round-up feature, where you round up every purchase to the nearest dollar and automatically deposit the change into your savings. Those pennies can add up over time without pinching your day-to-day budget. 

Reduce your expenses

As you determine how to save for a house, you might want to tighten your belt a bit so you can reach your goal faster. By implementing practical ways to save money, you can increase the amount you’re able to put into your house fund each month.

Subscriptions and memberships

Take a look at how much you spend on subscriptions and memberships. If you find that you’re not using some of them often, you can likely cancel them without feeling like you’re missing out. Reflect on the subscriptions you are using to decide if you really want to keep them all or if you’d rather get rid of some or switch to lower-cost plans so you can put that money toward your house savings. 

Monthly bills

Look for ways to reduce the cost of your necessary expenses, like utilities and insurance. For example, you can lower electricity, water, and heating costs with simple actions like turning off lights when not in use or using energy-efficient appliances. You might also want to shop around for better deals on things like your cell phone plan, internet, and car insurance. Changing companies or switching to a lower-cost plan can reduce your living expenses and free up some extra money for savings. 

Discretionary spending

Things like entertainment, dining out, and shopping may be fun, but they also eat up money that you could be saving for a house. You might want to reduce your discretionary spending by finding free or low-cost activities for entertainment, cooking at home more often, and using coupons. If you find yourself making a lot of unplanned purchases, put safeguards in place to reduce impulse spending that can derail your budget and savings plan. 

Increase your income

One way to increase your ability to save for a house is to boost your income. As you find ways to make more money, keep your savings goal in mind and put the additional funds toward your house fund. 

Side hustles and part-time work

One way to earn more money is to pick up a side hustle. There are lots of opportunities, from gig work to freelancing to monetizing hobbies. If your schedule allows for it, you could also pick up a part-time job to supplement your savings.

Raises and promotions

Consider asking for a raise or promotion if you think your employer might be open to it. Do some research on salaries in your industry and see whether you’re being paid what you’re worth based on your role and experience level. In preparing for the conversation with your boss, gather evidence of your contributions and how your efforts have positively impacted the company.

Earn interest and returns

In addition to knowing how to save for a house, putting your savings to work can be a valuable tactic in reaching your goal. By earning interest and returns on the money you set aside, you can take advantage of the power of compounding to help your savings grow more.  

Savings accounts and CDs

Regular savings accounts generally don’t offer very high interest rates. Instead, you might want to opt for a high-yield savings account or money market account that offers a higher rate. When you have a chunk of change you can set aside, you could look into opening a certificate of deposit (CD), which provides a fixed interest rate, often higher than savings accounts, in exchange for keeping your money in the account for a set period of time.  

Low-risk investments

If you have a mid-term savings goal, you may wish to look into low-risk investments where you could earn returns. You might consider options like government or corporate bonds, treasury bonds, or index funds. These could potentially provide steady growth without exposing your savings to too much risk.

Stay motivated and on track

Once you land on how to save for a house, you’ll need to stick with your plan. Building up enough money for a down payment and all the other costs of purchasing a home can take several years, so finding ways to sustain your commitment is important if you want to reach your goal. 

Tracking progress

Review your savings progress each month and make adjustments if needed. For instance, if you find that you aren’t putting aside as much as you’d planned, you might need to revise your timeline or look for more ways to trim expenses. And if you come into a windfall like a tax refund or bonus at work, you can put it into your house savings to increase your progress toward your goal.

Celebrating milestones

Your target savings amount may seem like a lot of money, so help yourself stay motivated by celebrating milestones. Set mini-goals and reward yourself for reaching them. For example, you could give yourself a special treat for each $1,000 you save. Brainstorm fun rewards that are free or low-cost so that your celebrations don’t undermine your saving efforts.

Staying accountable

Once you’ve made a commitment to saving for a house, keep yourself accountable. Telling friends or family about your savings goal can help you maintain your commitment. If you know someone else who shares your dream of home ownership, you could become savings buddies and lean on each other for encouragement. Some people find it helpful to practice loud budgeting, in which they talk openly about their financial goals and habits to practice accountability and get community support. 

How to save for a house: strategy and commitment

Saving for a house may seem daunting, but it can be achievable with the right plan. Start by getting very clear on what you want to achieve: the kind of house you want, how much you’ll need to save, and the timeline that’s reasonable for you. Then assess your finances and make an action plan that works for your budget and lifestyle. By sticking to your strategy over time, you can turn your homeownership dream into reality. 

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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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