This Is How to Save Money for a House

Are you trying to figure out how to save money for a house? If so, check out our guide here for some helpful tips.

If you're getting ready to buy your first house, you probably have a thousand questions.

Do you need a realtor? Do you need a downpayment? What about your credit score?These are all valid concerns. However, one of the most important questions you need to answer is how to save money for a house in the first place. Nearly 80% of American workers are living paycheck to paycheck, and you can't exactly buy a house with pocket change.

Unless you're independently wealthy, you could probably use some tips on how to save for a house. We'd like to help. Keep reading for our top 10 suggestions.

1. Determine How Much You Want to Put Down

When people talk about learning how to save money for a house, they're most often referring to the downpayment. The more money you put down on a house, the lower your interest rates and monthly payments will be.Most traditional loans require at least 20% down. If you don't put this much down, you'll be required to buy private mortgage insurance (PMI). PMI typically adds $50 to your monthly payments for every $100,000 of the home's value.To save for an appropriate downpayment, aim to reach 20% of your desired home's total value. For example, a $200,000 home would require a $40,000 downpayment. Use our mortgage calculator to find out more about payments, interest, and PMI.Alternatively, there are various types of loans that don't require such a large downpayment. Examples include FHA and USDA loans. It's important to do your research with these alternative loans as they come with various "strings attached." 

2. Ask for a Raise at Work

Learning how to save for a house primarily comes down to learning how to get more money. You should start by inquiring about a raise at your current job. However, if you take this route, make sure you're prepared to justify your request.For example, talk about your work performance, attendance record (assuming it's good), and so on. Saying you want more money to help save for a house will not be a valid justification for your boss.

3. Set Up an Automatic Transfer to a Savings Account

One of the best ways to save money for a house is by automating the process. Don't rely on month-to-month circumstances to dictate how much money you put towards saving for the downpayment. Instead, create an automatic transfer from your checking account to your savings account each time you get paid. This will keep part of the saving process out of sight and out of mind. 

4. Get a Secondary Part-Time Job

Depending on how quickly you want to buy a house, you may need to take a more proactive approach. For example, it may be worthwhile to get a second part-time job for a few months to fast-track your savings.There are plenty of options out there that won't interfere with your regular job. You'll have to find a place where you can work evenings or weekends. You'll be exhausted for a while, but it will get you into a home faster!

5. Start a Side Hustle

If you don't like the idea of working a part-time job for someone else but wouldn't mind putting in extra labor, you could start a side gig of your own. This can prove to be the best way to save for a house and develop an additional income stream. Here are a few suggestions:Drive for Uber, Lyft, or Door DashBabysitDo yard workWalk dogsSell products for a multi-level marketing brandBecome a freelance content creator/writerGet groceries for elderly people in your neighborhoodThere are tons of ways to make money on the side. Just be resourceful and creative and you'll find something that appeals to you. 

6. Downgrade Your Current Living Situation

If you're saving to buy a house, why not lower your monthly expenses by downgrading your current living situation. For example, if you're renting an apartment for $1,100 a month, find one for $800. You may take a hit on comfort and luxury, but it could save you hundreds of dollars a month. Alternatively, consider temporarily moving in with a parent, friend, or other family member to save even more money.

7. Downgrade Your Car

The average car payment in the U.S. is $554. That is a lot of money to hand out each month – money that could be going towards your new home. If you and your significant other both fall under that category, that's over $1,000 a month. We recommend getting out from under those vehicles and finding cheaper options. You can find reliable vehicles for $10,000 and under. Doing so will also lower your debt to income ratio and help improve your credit score.

8. Sell Stuff Online

Like most people, you probably have a vast collection of personal possessions. So much so, in fact, that you probably don't use half of what you own. For example, did you know the average person only uses 20% of their wardrobe on a regular basis? You can learn how to save money for a house by selling your excess stuff online. Use Facebook's community buy/sell/trade pages to post items you're willing to get rid of. You may be surprised how much people are willing to pay for your unwanted items.

9. Cut Out Unnecessary Expenses

Learning how to save for a house can also mean cutting out random unnecessary expenses from your monthly budget. This includes:Magazine subscriptionsMystery box subscriptionsMultiple streaming servicesGym membershipsDining out ShoppingManicures/pedicuresGoing to bars/clubsEtc.One of the biggest mistakes homebuyers make is failing to account for the extra costs of owning a home. There are things like HOA fees, homeowner's insurance, utilities, and more. Cutting back on unnecessary expenses now can help you build a more effective budget for the future.

10. Don't Neglect Your Credit Score

Finally, remember that after all is said and done, you still need to get approved for the mortgage. That means you need to maintain your credit score throughout the process of saving to buy a house.  Don't make poor credit decisions like taking out credit cards or personal loans that will increase your debt-to-income ratio. Any minor disruption in your credit score can affect your mortgage approval before the house closes.

Want More Tips on How to Save Money for a House?

Be sure to check out some of our other articles for more advice about real estate, including how to save money for a house. Our blog is dedicated to helping home buyers like you make the best decisions. And if you're ready to start shopping for your next home, contact us today to get in touch with one of our experienced real estate agents. We'd love to help you make your dream a reality.