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How to save money for a house

Savings suggestions when you are buying a home

When you want to buy a house, you typically need money for a down payment and closing costs. You might need money to pay for repairs and moving expenses, too. If you don’t have this money, check out our step-by-step guide to saving for a house!

Step 1: Set a budget you can afford

A great first step is to decide how much you can afford to spend on a house. This should be based on both the total cost of buying the home and the cost of the monthly payments. Our calculators can help you do this.

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Home affordability calculator

Estimate the prices of homes you can afford to buy.

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Mortgage payment calculator

Estimate how much you might pay monthly on your home loan.


These calculators can help you better understand the total cost of buying a home, including closing costs. You will need to pay some of these costs at closing, which is why you need cash in hand to buy a house. With some mortgages, you can include the closing costs in your mortgage, then pay them throughout the life of the loan.

Step 2: Choose a down payment

Your down payment is often the biggest, single expense you need to pay in cash at closing, which means it is frequently the most important part of your savings plan! Think about these two things:

First, consider the minimum down payment you will need. If you are eligible for a VA loan, you can often buy a house with no down payment. If you are a first-time homebuyer or otherwise qualify for an FHA loan, these usually require a minimum down payment of 3.5% of the purchase price of the home. For a Conventional loan, lenders typically require a minimum down payment of 5% of the purchase price, or more. Learn more about loan types here.

Second, think about whether you want to make more than the minimum down payment. A larger down payment might help you get a better interest rate or better loan terms, because mortgage lenders often view homebuyers who make larger down payments as lower-risk customers.

Making a larger down payment means you are borrowing less money to buy the home, which can help you save money on interest payments throughout the life of the loan.

If you get a Conventional loan, a larger down payment can help you lower how much you pay for private mortgage insurance (PMI), because you are paying PMI for a shorter period of time. If you make a 20% down payment or more with a Conventional loan, you can avoid paying for PMI altogether.

Step 3: Estimate your closing costs and cash to close

When you buy a home, the closing costs can often add up to between 3% and 6% of the purchase price. For example, if you buy a house for $300,000, you might pay between $9,000 and $18,000 in closing costs. Learn more about closing costs.

However, you don’t always need to pay the full amount of these closing costs in cash at the time you close on a home. Many times, you can finance some closing costs into your mortgage and pay them as part of your monthly bill. This lowers the amount of cash on hand you need at closing. However, it does increase the size of your mortgage and the amount of interest you will pay over the life of the loan.

Step 4: Estimate costs for moving, remodeling, and repairs

Moving into your new home costs money, so include an estimate of this expense. Many homes need remodeling and repairs, and it is easier to have this work done before you move into the house, rather than after. Be sure to think about saving for these expenses, as well.

A sample estimate of your savings goal

Let’s say you decide you can afford to buy a $300,000 house with a 10% down payment, and the cash needed to close equals 3% of the purchase price. Also, let's assume that you budgeted $5,000 for moving and $10,000 for repairs. This means that your savings budget to buy a house would be $54,000. Check out this table:

Down Payment (10% of 300,000) $30,000
Cash to close (3% of $300,000) $9,000
Moving expenses $5,000
Repairs $10,000
Total $54,000

Step 5: Decide how fast you want to reach your savings goal

It is easier to save $54,000 in three years than it is to save it in one year. Think about how quickly you want to reach your savings goal in order to have the money you need to buy a house. How fast you can reach your goal is affected by your income, your monthly expenses, your lifestyle, and more.

Step 6: Look for bigger ways to save money

Housing costs, car payments, and vacations are three major expenses you can often control. If you are renting, think about moving to a less expensive apartment. If you own a car, put off buying a new or newer vehicle while you are saving for a house. This can help keep your car insurance lower, too. For vacations, look for cheaper choices closer to home or think about a staycation, instead.

Financial professionals generally recommend you pay down debts, especially high-interest debts, before you save for expenses like buying a home. If this fits your current financial situation, think about paying down debt first. This may also improve your credit score and finances, which can make it easier for you to get approved for a mortgage, possibly even at a lower rate.

Step 7: Look for smaller ways to save money

It is easy to spend a lot of money on restaurants, clothing, and entertainment. Add up how much you typically spend on these expenses, then set a lower budget for yourself.

There are often several little expenses that can add up to bigger amounts when you put them all together. Check out these ideas:

  • Cut the cord on expensive cable TV packages and landline phones. Look at your bills for internet access and determine if you can save money by bundling your internet, TV, and phone services.
  • Review your monthly subscriptions to apps, music, video streaming, news, and other online services, as well as gym memberships and fitness classes if you aren’t using them.
  • See if you could lower your grocery bills by cooking from scratch, rather than dining out.

Step 8: Make saving for a home automatic

When you are paid by direct deposit, it is often possible to send a portion of your paycheck into a savings account, rather than a checking account. This is a great way to automatically save money!

When you are saving for retirement, think about reducing your contributions while you’re saving for a home. However, it's a good idea to look at the big picture first. If your employer matches contributions, find out what you need to contribute to take full advantage of the match. Generally speaking, it is better not to borrow from a retirement account to get money for a down payment, because you often have to pay penalties and taxes when you do.

Step 9: Check the value of your current home’s equity

When you own a home, the value of your home’s equity can be an important source of money for your next home. Your equity is equal to the current value of your home, minus the amount you owe on your mortgage and any other home loans you may have. For example, if your home is worth $325,000 and you own $250,000 on your mortgage, you have $75,000 in equity.

Keep in mind that selling a house comes with costs (such as real estate commissions) that will reduce the amount of money you may receive. Consider these costs when estimating the value of selling your home.

If you are searching for a home, Freedom Homes partners can connect you with a local real estate agent in your area. You can save money when you buy and sell a home through Freedom Homes.*

*1Cash Rewards are provided by HomeAdvantage Partners. HomeAdvantage Partners is not affiliated with Freedom Mortgage Corporation. Freedom Mortgage Corporation is not responsible for the program provided by HomeAdvantage. Obtaining a mortgage from Freedom Mortgage Corporation is optional and not required to participate in the program offered by HomeAdvantage. The borrower may arrange for financing with any lender. Freedom Mortgage Corporation is not licensed as a real estate broker, and its employees are not authorized to perform, nor do they perform, any activity that is or could be construed as unlicensed real estate activity.

Home buyers and sellers must use a real estate agent in the HomeAdvantage network to be eligible for Cash Rewards and the prospective purchaser or seller of real estate property must be eighteen (18) years of age or older. In some cases, a real estate agent in the HomeAdvantage network may not be available. If you are currently working with a real estate agent, this is not a solicitation.

Cash Rewards may be in the form of a closing cost credit disclosed on the Closing Disclosure or a reduced real estate commission with the exception of the following states where a check will be issued after closing; AL, AK, IA, KS, LA, MS, MO, OK, OR and TN.

Freedom Mortgage is not a financial advisor. The ideas outlined above are for informational purposes only and are not investment or financial advice. Consult a financial advisor before making important financial decisions.

Last reviewed and updated September 2023 by Freedom Mortgage.

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