How to Save for a Down Payment on a House

Have you always dreamed of owning your own home? It’s not an uncommon goal. But one of the biggest challenges is saving up enough for a down payment.


Does this mean you’ll have to wait several years to buy a home? Not quite. Read on to discover the best ways to save up for a down payment.

How to Save for a House

Before you begin saving for a down payment on a house, you need to know how much house you can afford. There are several things you will need to plan for. Your monthly mortgage payment will include the following:

  • Mortgage principal and interest
  • Real estate taxes
  • Private mortgage insurance (PMI)
  • Homeowners insurance
  • Homeowners’ Association (HOA) fees, if any.

You will also have closing costs and possibly moving expenses.

Also, remember that for a conventional mortgage, you’ll typically need to save up to 20% of a home’s purchase price for a down payment. That means you’ll likely need to come up with tens of thousands of dollars.

Make a Plan

What good is a plan when you don’t know where the funds will come from? That’s a valid question. But having a plan allows you to set a deadline for saving money with measurable objectives along the way. It also serves as a motivator to make things happen.

To illustrate, if you need to save $6,000 in 12 months for a down payment, you must find a way to come up with $500 each month.

Some may be able to do this by cutting a few expenses. Others may have to get creative and find other ways to earn money. Either way, breaking it down into small chunks makes meeting the goal a lot more workable.

So, start by figuring out how much you need, come up with a plan, and execute. And remember that discipline is a must. If you have the right mindset and commit to the plan, you’ll be closing on your new home in no time.

Check Out Our Top Picks for 2022:

Best Mortgage Lenders

Prepare for the Unexpected

Life happens, and sometimes those unexpected occurrences can wreak havoc on your finances. This makes it near impossible to achieve your savings goals. But you can cut the chances of this happening by creating a safety net before you start saving for a down payment. That way, your dreams of buying a home won’t crash and burn if a financial emergency comes up.

Pay Yourself First

Have you ever tried saving money at the end of the month only to have your plans go up in smoke? It usually goes a little something like this: you make a budget for the month and vow to follow it line by line. And whatever is remains at the end of the month gets deposited into your savings, CD, or money market account.

Sounds good, but that’s not usually how it goes. A more realistic chain of events: you create a budget and all is well until life happens. By the end of the month, your wallet is empty and you’re awaiting the next paycheck.

We’re talking about saving up thousands of dollars for a down payment fund. For this reason, you want to save money at the beginning of the month or pay yourself first. This ensures a busted budget doesn’t get in the way of saving up for a down-payment on a home.

Get Creative

Do you have a gift or talent that can help you roll in some extra dough? Or can you perform a service that others will pay you for? Maybe you’re a stellar freelance writer, painter, or have experience pet sitting? These are a few ways you can get your creative juices flowing to start raking in extra money for the down payment.

Make It Fun

Did you discover a brand-new savings challenge at the beginning of the year? You don’t have to wait until the new year to partake in the fun. Put a savings challenge in place now to help accomplish your goal. A few ideas:

  • Gather a group of friends to join in as you embark on the challenge. You can come up with some sort of small incentive to award the person who reaches their target goal the fastest. Even if you don’t win, having that sort of accountability will help reach your goals faster.
  • Keep the change. You won’t get very far saving coins from transactions. But committing to saving every $1 or $5 bill could be effective. (This approach is most effective when you only use cash for everyday transactions).
  • Commit to no-spend days. Pick one day of the week to not spend a single dollar (unless it’s an emergency).
  • Rotating spending category months.
  • Use financial windfalls wisely. If you receive an unexpected financial gift or a lump sum of cash, put it in your down payment savings account.
  • Participate in a 52-week challenge with weekly increases. You don’t have to wait until the first of the year to get started. Start on your next payday and stretch it out for an entire year.

Look at Your Budget

When was the last time you took a close look at your budget? If it’s been a while, you may be wasting money on items or services that are no longer needed or beneficial to you. Or you can stand to reduce some expenses and reach your savings goal faster. Some tips to cut costs:

  • Bundle cable, internet, and phone services or cut them altogether.
  • Request a free energy-audit to identify problem areas in your home.
  • Increase the deductible on your insurance policies to decrease premiums.
  • Create weekly meal plans to decrease grocery expenditures.
  • Ditch eating out for home cooked meals.
  • Use coupons and shop for bargains.
  • Avoid impulse spending.
  • Downgrade your cell phone or opt-in for a low-cost prepaid plan.

Boost Your Income

Worried about stretching yourself too thin from your savings plan? Explore other ways to boost your income so your efforts won’t interfere with your budget. Some ways to pull this off:

  • Work overtime to earn some extra cash.
  • Ask for a raise if it’s been awhile and your latest evaluation was stellar.
  • Get a part-time job and work when you have spare time.
  • Find odd jobs on Craigslist.

Refinance Existing Loans

Are you paying too much in interest for your current debt obligations? The only way to find out is by reaching out to your lenders to determine if you’re eligible for lower interest rates.

If not, consider refinancing your loans, especially student loans, to lower the monthly payment and free up funds to go towards your down payment. (Keep in mind that extending the loan term could mean more interest paid over the life of the mortgage loan unless the new interest rate is lower).

Consolidate Your Debt

What about credit card debt with exorbitant APRs that are costing you a fortune? Explore debt consolidation options to determine if you qualify for a loan with a competitive rate. By going this route, you could shave hundreds off your monthly expenses, and pay off the credit cards much faster while saving for a down payment on a house.

Automate Savings

It’s difficult to reach your regular savings goal if you wait until the dust settles at the end of the month to set funds aside. But by automating your savings, funds can be withdrawn from your account and transferred into the account designated for down payment proceeds.

Bottom Line

Despite your fears of how difficult it is to save for a down payment, you can pull it off if you have a solid plan. It may take a bit longer than you’d like, but the benefits of homeownership will make your efforts worthwhile.

Allison Martin
Meet the author

Allison Martin is a syndicated financial writer, author, and Certified Financial Education Instructor (CFEI). She has written about personal finance for almost ten years and holds a master's degree in Accounting from the University of South Florida.