One of the biggest hurdles to buying a home is saving for a home. From down payments to closing costs and moving costs, buying a home can be expensive. If you’re just starting to think about buying a home, you may need to spend some time saving up to buy a home.
This Redfin article shows you how to save money on your home in 9 steps. Whether you’re buying a home in Cleveland, Ohio, or a condo in Richmond, Virginia, there are many ways, big and small, to save money on a home and become a homeowner.
How much should I save to buy a house?
First, it’s important to decide how much home you can afford. The amount you need to save to buy a home depends on your financial situation, goals, and where you live. Before you start saving, it’s important to set clear goals by considering three major costs:
1. Down payment
The down payment is one of the largest initial costs when purchasing a home. Some loan programs allow down payments as low as 3%, but saving more can reap long-term benefits.
Lower monthly payments: The more you put down, the less you need to borrow and the lower your monthly mortgage costs. Increasing your down payment from just 3% to 10% can lower your monthly payments by hundreds of dollars. Avoid private mortgage insurance (PMI): If you put at least 20% down, you can avoid paying PMI, which can add $100 to $300 to your monthly mortgage. Better loan terms and interest rates: Lenders often offer better interest rates to buyers who make a larger down payment, saving them thousands of dollars over the life of the loan.
Even if saving 20% isn’t realistic, saving at least 5-10% will result in meaningful savings in the long run. The key is to strike a balance between buying early with a lower down payment and waiting to save more and reduce future costs.
2. Closing costs
Closing costs range from 2% to 5% of the home purchase price. These fees include everything from inspections and appraisals to insurance and lender fees. Some buyers can negotiate with sellers to cover some of these costs, but it’s best to plan ahead.
3. Moving expenses and ongoing expenses
The cost of moving will be determined by the distance you are moving and what you own. According to a 2025 study by Angi.com, moving costs range from $883 to $2,569. However, moving long distances can cost more than 100,000 yen. You should also have savings for furniture and home maintenance, as well as an emergency fund for unexpected repairs.
9 strategies to save money on your home
Saving for a home or a big purchase can be as simple as making small changes that will pay off over time. Whether it’s changing your budget or changing your spending habits, there are many strategies to save money on your home.
1) Create a new budget
The first strategy to save for your home is to reevaluate your budget and create a new one. Understanding what you’re spending money on each month can help you identify ways to cut back and how much you can realistically save. Here are some ways to get started:
Determine your take-home pay: Determine the amount of your monthly income after taxes. This should include income contributed by you and anyone else in your family. Compare this number with your credit card or bank statement to see how much you’re spending each month. Put a hold on recurring payments: When you check your credit card or bank statement, note whether you have any recurring payments. This includes things like rent, car payments, internet bills, student loans, groceries, and other utilities. Next, look at how much you spend on non-essentials like streaming services, restaurants, and additional purchases. Identify which expenses to cut: Once you’ve identified unnecessary expenses, you can decide what to cut or eliminate. Maybe you’re subscribed to multiple streaming services and can cut it down to just one. If you eat out multiple times a week, consider limiting it to once a week. Small changes like this can save you money every month.
2) Open a dedicated savings account
Having a savings account dedicated to your home finances makes it easier to track your progress and eliminates the need to put money toward everyday expenses. Instead of keeping your savings in a standard account, consider a High Yield Savings Account (HYSA), which offers significantly more competitive interest rates (sometimes 4% APY or higher). Over time, this can add hundreds or even thousands of dollars to your home.
To make the most of your savings:
Online banks or credit unions often offer better interest rates than traditional banks, so choose a fee-free HYSA. By setting up automatic transfers from your paycheck, you can save money on an ongoing basis without having to think about it. Keep this account separate from your daily expenses to prevent accidental withdrawals.
If your current bank charges a maintenance fee or offers a lower interest rate, it may be time to switch. A properly managed savings account can help you reach your goals faster with little effort.
“Setting up automatic transfers to a dedicated savings account can help eliminate the temptation to spend money you intended to save,” said Gina Seibert, CFO at PSECU. “Understanding cash flow is equally important. Knowing what’s coming in, what’s going out each month, and what’s realistically left in savings can help buyers set goals they can stick to. A simple budget only works if you review and adjust it regularly.”
3) Reduce expenses
Once you’ve reviewed your budget, it’s time to decide how to reduce your spending. This doesn’t mean cutting out all non-essential expenses, but rather controlling future expenses and determining which expenses you can live without.
For example, if you’re considering buying or leasing a new car, think about how much your monthly payments will hinder your savings. Can I continue driving the car I’m currently driving? Or can you buy a used car or use public transportation?
Making small changes can also result in big savings. Consider lowering your energy bills by setting your thermostat lower or higher, buying used items instead of new, and preparing meals instead of eating out.
4) Increase your income
Working more may seem like a lot, and asking for a raise is a lofty goal. But remember, the big picture plan is saving for a home purchase. An increase in your income can have a bigger impact on your ability to save than other small changes. Perhaps your current workplace offers the opportunity to work overtime. See if you would like more hours or if you can pick up a shift for a colleague.
If a raise or promotion is possible, advocate for yourself and take the next step. If you’re not sure how promotions work in your company, ask your boss, coworkers, or human resources. Reach out to others in your field and potential mentors who can give you advice. When you succeed, celebrate (with a small reward) and put as much of your new income toward home savings as possible.
5) Sell assets you don’t need or use
You may think that you don’t own anything of particular value that you can sell. But if you have two cars, ask yourself if you only drive one most of the time. Consider selling your other car and using the money to buy a home.
You can also find personal items that you no longer use and sell them. Examples include sports equipment, musical instruments, clothing, jewelry, and forgotten hobbies such as small appliances. If you haven’t used these items recently, you probably won’t ever use them again.
6) Avoid big expenses before purchasing
If you’re serious about saving money, consider postponing major purchases until you buy a home. Making large financial commitments can deplete your savings and affect your ability to qualify for a mortgage.
“One of the most common mistakes is taking on new debt while preparing to buy a home,” says Gina. “Even purchases that seem manageable, such as financing furniture or opening a new credit card, can impact your credit score and debt-to-income ratio, and lenders will evaluate these closely.”
Please refrain from buying a new car. Taking out a car loan increases your debt-to-income ratio. Lenders will take this into account when approving your mortgage. Leasing also increases your monthly obligations. Reduce Vacation Costs – Traveling is great, but choosing a budget-friendly trip or staycation can help you save even more on your down payment. Avoid financing new furniture or appliances. While it’s tempting to upgrade before you move, waiting until after you’ve closed can help you get your savings back on track.
If the purchase is not mandatory, it is best to wait. Every dollar you save gives you more flexibility when purchasing a home.
7) Schedule payments for all your bills
You can set up automatic payments for almost any expense. Most banks allow you to do this for free on their site or app. This helps you pay your bills on time and eliminates interest and late payment charges.
However, be sure to understand your bill before scheduling a payment. Are there any bills you don’t recognize? Are you only paying for what you need? For example, mobile phone companies are notorious for charging extra fees. They may waive the fee if you request it, but if not, the fee will continue to increase.
Even if you pay your bills automatically, be sure to check your credit card statement each month for suspicious charges. Also, if you’re paying for cable TV or other services you don’t use, cancel them.
8) Reduce debt
It may seem counterintuitive to pay off some of your debt instead of saving it. However, lenders will look at your debt-to-income ratio (DTI) as part of the mortgage approval process. DTI is your debt to income ratio. If your DTI is high, it can affect your ability to qualify for certain mortgages and obtain favorable loan terms.
For example, you may have to make a higher down payment or pay more interest over time. Therefore, reducing your debt over time will lower your DTI and improve your loan terms. Debts you may want to consider paying off include student loans, credit cards, and car and personal loans.
9) Shop wisely
Some smart ways to shop include buying certain products only when they’re on sale, using coupons, and buying generic brands. You’re probably paying more for a brand name than for a genetic brand or an in-store brand. Switching to a different brand can save you money without changing your daily routine too much.
When you add up the potential savings from all of these strategies, you may end up saving more than you expected. If you consciously change your habits, it’s only a matter of time before you save enough money to buy your first home.
What are the benefits of saving money for housing?
Even if it takes a little longer to buy a home, there are benefits to saving up more for a down payment. Here are some of the benefits:
Better loan terms: A larger down payment shows lenders that you’re a better candidate, and they may offer you better loan terms or a lower interest rate. Lower monthly payments: The more you make your mortgage payments, the lower your monthly mortgage payments will be. No Private Mortgage Insurance (PMI): If you have a 20% down payment, you don’t have to pay PMI. A decline of less than 20% means you will need to pay PMI. Immediate home equity increase: The more you put down, the more home equity you’ll have after closing. Have enough cash for closing: Have money available for closing costs (fees and taxes you pay when the home is yours). Emergency Fund: An emergency fund for home maintenance repairs and other unexpected expenses looks great on your loan application and is always a wise choice.
Frequently asked questions about home savings
How long does it take to build a house?
Your schedule will depend on how much you need to save, your current savings, and whether you need to pay off any debt first.
When should you start saving for a home?
If you need to pay off your debt, consider starting there first. You can also start saving little by little before making a big savings.
What is the down payment assistance program?
Down payment assistance programs are loans and grants that help potential home buyers reduce their down payment and closing costs. Programs are available at the local, state, and national levels, so there are many options for qualifying.
Where should I put my savings?
Any savings account will work, but some have higher interest rates than others. These are high-yield savings accounts and money market accounts. Because certificates of deposit (CDs) store your money for a set period of time, CDs aren’t the best option unless you’re willing to wait a year or more before buying a home.
