7 Practical Ways to Save Money for Your Dream Home

Are rising property values making you second-guess your ability to buy a home? You’re not alone!

I had my doubts, too, when I was initially looking for a property. But despite my apprehension, I managed to achieve my goal without stretching my budget too thin.

In this guide, I’ll share some strategies I used to save for my first home. Stick around because this might be a life-changer for you!

1. Reduce Major Expenses

Cutting back on your expenses is a powerful way to save up for a house.

Cancel anything you don’t use often, like unused gym memberships or magazine subscriptions. Also, consider cutting down on overlapping streaming services.

You can try cooking at home more frequently to save money on dining out as well. Use up what’s in your fridge and try batch cooking.

Another method is to look for ways to reduce your utility bills. Remember to lower your thermostat to save on heating and cooling costs.

Additionally, when grocery shopping, stick to your list to avoid overspending.

Pro Tip: Consider using a budgeting tool like You Need A Budget (YNAB)!

It helped me take control of my finances and set precise saving goals for our house.

Basically, this tool can give you a clear picture of where your money goes and how you can redirect it towards saving for your new home.

2. Consider Downsizing Your Current Living Space

Think about downsizing your living space!

By moving to a smaller home or apartment, you reduce monthly expenses such as rent, utilities, and maintenance costs.

For example, we moved from a three-bedroom to a two-bedroom apartment. We saved hundreds each month that went straight into our house fund.

Pro Tip: If downsizing isn’t feasible, consider renting out a spare room, your car, or even your parking space.

Personally, renting out our unused garage space added a steady income stream that boosted our savings without drastically changing our lifestyle.

3. Adjust Your Current Insurance Policies

Adjusting your current insurance policies is a great way to free up more money for your house savings.

By shopping around and comparing different insurance options, you can potentially lower your monthly expenses significantly.

I found using Policygenius really helpful for this! 

It allowed me to see quotes from various providers all in one spot, which made it easy to choose the best options.

In addition, the platform isn’t tied to any insurance company, which means the comparisons are unbiased.

4. Consider a Side Job

Taking on a side job can boost your savings as you prepare to buy a house!

As a work-from-home mom, I’ve found that side jobs can make a huge difference in building up a house fund without compromising family time.

For me, blogging has been an invaluable side hustle. It brings in extra income and allows me to manage my time effectively!

It ensures I don’t miss out on precious moments with my kids because I’m just at home.

Most importantly, it provided me with extra money, which helped me grow my budget to buy our dream home!

5. Take Advantage of Employer 401(K) Matches

Another excellent way to boost your savings for a house is by taking full advantage of your employer’s 401(k) match program.

This is essentially free money that can amplify your retirement savings and indirectly aid in your financial preparations for buying a home.

Here’s how it works: If your employer offers a 401(k) match, any contribution you make up to a certain portion of your salary will be matched by your employer.

For instance, if your employer matches contributions up to 5% of your salary, and you earn $50,000 a year, contributing $2,500 to your 401(k) means your employer will also contribute $2,500.

In other words, this doubles your savings!

In our family, my husband makes sure he contributes enough to his 401(k) to get the full employer match.

6. Slash Your Debt

Before you start saving for a house, get your debts under control first.

You want to avoid becoming “house poor,” which means spending so much on your dream home that you have little left for other expenses.

Begin by focusing on paying off debts with the highest interest rates. This usually includes credit cards and personal loans.

By paying more than the minimum payment on these debts, you reduce the total interest you pay and clear the debt faster.

Once you finish paying off one debt, don’t pocket the extra money. Instead, use it to increase payments on the next highest-interest debt.

This “snowball method” speeds up debt elimination and frees up more money for savings.

It might take time, but steadily working through your debts will eventually free you from them.

Only after clearing significant debts should you start aggressively saving for a down payment.

7. Open a Separate Savings Account

Opening a separate savings account specifically for your house fund is recommended.

Doing so helps keep your house savings organized and distinct from your everyday spending!

Pro Tip: Automate your savings! Set up a direct deposit or automatic transfer from your checking to your savings account right after each paycheck.

This guarantees you save consistently without having to think about it every month.

Initially, I didn’t separate our savings, and one day, I accidentally spent part of what was supposed to be our house fund on an unexpected car repair.

It was a wake-up call to get systematized with our finances.

Now, we automate our savings! It has made the process smoother and less stressful for me!

Other Costs to Consider When Saving for a House

When saving for a house, everyone talks about the price of the home and the down payment. But note that there are other costs that can sneak up on you.

Closing Costs

These are the fees you need to pay when you finalize buying your house. They include:

• Home Inspection Fees: This is what you pay to make sure the house is in good shape.
• Appraisal Fees: This is paid to confirm the house’s value is fair.
• Origination Fees: These are charged by the lender to process your loan.
• Title Insurance: This protects you from claims against your new house.
• Taxes: You’ll have to pay taxes related to the sale, such as capital gains tax.

Moving Expenses

Don’t forget about the costs of moving your stuff to your new home. Whether you hire movers or rent a truck and do it yourself, it’ll surely cost you money.

When planning our move to a new home, the financial side really caught us off guard. We decided to hire professional movers to save on stress and labor.

The cost of moving services alone came to about $4,500!

Homeowners Association (HOA) Fees

If your new house is in a community with a homeowners association, you’ll have monthly or yearly fees to pay.

In our current community, we pay $250 monthly in HOA fees. This covers things like the maintenance of shared spaces, community pools, and security.

How Much Should You Save to Buy a House?

If you’re eyeing a $300,000 home, aim to save about $85,000 to $104,000. This helps cover the down payment and other upfront costs.

Here’s a basic example of how you might plan your savings for a $300,000 house:

Note: Everyone’s financial scenario is different, so adjust your savings plan to fit your needs and ensure you’re not stretching yourself too thin.

What Percentage of Your Income Should Go Towards Saving for a House?

Deciding how much of your income should go towards saving for a house depends on your overall financial health and goals.

A helpful guideline is the 50/30/20 rule, which suggests spending 50% of your income on needs, 30% on wants, and dedicating 20% to savings.

However, note that the 20% for savings isn’t just for your house budget. This portion also needs to cover emergency funds and retirement savings.

Can Investing Help You Save for a House Faster?

Investing can potentially speed up your savings for a house, but it’s not guaranteed.

On the positive side, it can offer the potential for higher returns!

For instance, if you pick the right stocks or mutual funds, your investment can grow significantly due to market gains and compounding interest over time.

However, there are downsides, too. Of course, the biggest is the risk of losing money.

Markets can be unpredictable, and when they dip, so does the value of your investments.

This happened to a friend of mine right before she planned to buy a house, and it delayed her plans by a couple of years as she needed time to recoup her losses.

I hope this guide helps you figure out how to save money for a house! Do you have any tricks for saving money that work for you? 

Or is there anything you’re still not sure about? Let me know in the comments below!