How to Save for a House

Quick Answer

Saving for a house requires coming up with a down payment and closing costs and accounting for moving expenses. You’ll also want to find the right account to hold your house fund and creative ways to reduce your expenses to save more.

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Buying a home is a huge financial transaction and, for many, a primary part of the American Dream. As of May 2024, the median home price in the United States was $419,300, according to the National Association of Realtors (NAR). You don't have to come up with that cash all at once to become a homeowner, of course, but your down payment and closing costs can add up quickly. Let's talk about how to save for a house, where to keep your savings and how much money to sock away.

How Much Money Do You Need to Buy a House?

The amount you'll need to save for a house really depends on where you want to live and the type of home you're looking to buy. These factors, as well as the home's square footage, condition and age influence the sale price and, in turn, how much you'll need for a down payment and closing costs. Below are the main expenses you'll need to save for when buying a home.

Down Payment

The down payment is the amount of the sale price you pay upfront. The rest is then financed through a mortgage (unless you're making an all-cash offer). Making a 20% down payment has long been the golden rule, but it can also be a barrier to homeownership. For example, you'd need to save $80,000 to buy a $400,000 home. A hefty down payment has its advantages, like a lower monthly payment and no mortgage insurance requirement, but it isn't a requirement for many mortgages.

Here are the minimum down payment requirements based on loan type:

  • Federal Housing Administration (FHA) loans: First-time homebuyers who have a FICO® Score of 580 or higher can get an FHA loan with a down payment as low as 3.5%.
  • U.S. Department of Veterans Affairs (VA) loans: VA loans are available to certain U.S. service members, veterans and surviving spouses. There is no down payment requirement.
  • U.S. Department of Agriculture (USDA) loans: These mortgages are for low- and middle-income homebuyers in certain rural areas. USDA loans are known for their low rates and 0% down payment requirement.
  • Conventional loans: Some conventional loans, which aren't backed by the federal government, require a down payment of just 3%. The exact amount will depend on the borrower's financial situation and the lender.

Closing Costs

Closing costs are made up of assorted fees and are typically paid upfront when finalizing the home sale. The good news is that some closing costs are negotiable. These costs generally range from 3% to 5% of the purchase price and include:

  • Fees paid to the mortgage lender: These are fees associated with the loan itself, such as origination fees, discount points and mortgage insurance if you're required to purchase it.
  • Payments to external service providers: That may include the home inspection fee, appraisal fee, title search services, title insurance premiums and real estate attorney's fees.
  • Prepaid funds: A portion of your homeowners insurance premium and property taxes will likely be due at closing and put into an escrow account. You'll continue paying into this account with each monthly mortgage payment. When these bills come due, the lender will pay them on your behalf.

Moving Costs

Don't forget about the logistics of settling into a new home. Hiring movers typically costs anywhere from $878 to $2,547, according to HomeAdvisor. You might also run into these hidden moving costs:

  • Packing materials
  • Moving insurance
  • Additional fees like heavy item charges and stair fees
  • Moving truck rental and gas
  • Storage fees
  • Furnishing and decorating your new home

Where to Save Money for a House

Coming up with the money to buy a home usually takes time. The following types of accounts can help you earn interest along the way.

Investment accounts can be a risky holding place if you're hoping to buy a home within the next few years. Thanks to regular market volatility, you could end up suffering significant losses in the short term. Retirement accounts also aren't ideal. They're designed to hold your nest egg—and pulling money out of tax-deferred retirement accounts will likely result in a tax bill and 10% early withdrawal penalty.

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8 Ways to Save for a House

  1. Revisit your budget and make sure you're financially ready to buy a home.
  2. Choose a monthly savings target, then set up automatic transfers to your home fund.
  3. Set aside work bonuses, tax refunds and other cash windfalls.
  4. Pick up a side hustle or part-time job.
  5. Find ways to reduce your expenses, like canceling unused subscriptions and negotiating your bills.
  6. Look into first-time homebuyer programs and grants.
  7. Negotiate a raise or one-time bonus.
  8. Consider taking on a roommate or renting a more affordable home.

Learn more >> How to Buy a House

Frequently Asked Questions

  • Look at your budget and decide how much you can reasonably afford to save each month. Reducing your expenses or moving to a more affordable rental unit might be worth exploring.

  • Your debt balances, interest rates, credit score and debt-to-income ratio are important factors to consider. Prioritizing debt can help your credit and may allow you to qualify for a better mortgage rate, but it could also dilute your saving power—and delay your homeownership goals. The right option for you will depend on your financial situation.

  • It comes down to the size of your down payment and your anticipated closing costs and moving expenses. Researching average home prices in your area can help you estimate how much you'll need to save in total. From there, you can back into that number in a way that works for your budget.

The Bottom Line

If you're curious about how to save for a house, treat it like any other financial goal—do your research, make a plan and then prioritize it. That might require you to make some trade-offs, but the end result may be well worth it. No matter your timeline, having strong credit can help you qualify for a mortgage with the best rate possible. Check your FICO® Score for free with Experian to get started.