Your 12-Month Master Savings Plan to Buying Your First Home—While Paying Down Student Loans



Not-so-breaking-news: home prices are on the rise, especially in large metro areas. In San Francisco, the median price for just an entry-level home is $450,600. Meanwhile, in Portland, average home prices grew 11% to $334,900 since last year. So saving for a down payment for your first house can be tough. Especially if you’re trying to buy that first home with student loans to pay off. And if you’d like to purchase that home super fast to lock in a competitive mortgage rate and put your rent money toward something that builds value, it can feel impossible.

But here’s the good news: It’s definitely doable, even within just 12 months, if you accelerate your savings and prepare wisely. Follow our strategy below to take that big step into home ownership fast.

Months 1–3: Save Like You’ve Never Saved Before

Do the math. Saving 10% for a down payment on a home priced at $450,600 is far more manageable than following the old 20%-down school of thought, especially when you have student loans to pay off. To succeed at saving $45,060 in a year’s time, you’ll need to save $3,755 a month, which seems slightly more plausible if you take a breath and break it down into 52 weeks, at $867 a week.

But don’t put your calculator away yet.

In addition to saving for the down payment, you’ll need to factor in closing costs, which typically amount to about 3% of the home price. So you need to add $260 to your weekly savings goal for a total of $1,127.

Yeah, that’s a big chunk of change. But don’t panic; the first step is always the hardest. Just imagine yourself hosting your first dinner party or Super Bowl bash, and remember to consider student loan refinancing, which can help lower your interest rate, monthly payments, and ultimately save you money.

Revise your budget. Hunker down and take a hard look at your budget. If you’ve decided to refinance your student loans, don’t forget to adjust your monthly fixed expenses to account for your lower payments. Compare your income and expenses to get a clear view of your spending habits, and then make the necessary changes to meet your weekly savings goals. Look closely at your expenses to see what you can give up to increase your savings, and what costs you can cut back on. Can you nix the cable in favor of a Netflix subscription, or join a rideshare to save on gas? Also consider setting limits on eating out and buying clothing or gadgets you don’t really need.

Related: The Realtor’s Guide to Getting Your Dream Home

Start a home fund. Open a savings account just for your down payment, and avoid dipping into it. This will keep that money accessible and help you keep careful tabs on your progress. If you’re looking for a non-traditional option, consider opening an Ally savings account, which offers 1% annual percentage yield (APY).

Reach out to your family and friends. Within your 12 months of saving you’re going to have a birthday and celebrate gift-giving holidays. So, let your friends and family in on your major goal of buying a house, and ask that they give money toward a down payment in lieu of material presents. Just remember that you’ll need gift letters from the generous people in your life, indicating that there is no expectation of repayment. Depending on the mortgage loan, rules vary when it comes to how much of your down payment can come from gifts.

Months 3–6: Spend Less, Earn More

Flex your negotiation muscles. Put your savvy bargaining skills to use to get lower interest rates on existing credit cards and auto loans, or discounted rates on subscription services, such as cable and Internet.

Ramp up your income. Think of creative ways to use your expertise and skills to boost your income. You did invest a substantial amount of time and money in your education, after all, so maximize the ROI to rake in some extra cash to put toward your home fund. Perhaps you can roll out an e-course or teach a professional seminar at your local junior college. And, if the time is right, ask for a raise.

Months 7-9: Boost Your Credit

Review your credit report. Make sure your credit report is error-free and that your credit score is as high as it can be. And mind the cardinal rule of credit scores: pay your credit cards, student loans, and bills on time. Check your credit utilization ratio (the amount of your credit card balances against their limits), too; you want that number to be low. Now is also the time to be wary of applying for new lines of credit, as that will result in lenders doing a “hard pull” on your credit. Too many of these within a 6-month time frame could ding your credit score.

Recommended: 7 Ways to Make Buying a Home on Your Own a Reality

Keep an eye on your DTI. Make sure your debt-to-income ratio (DTI) is as low as possible. Your DTI is a key part of securing a mortgage, and while the lower the better, it should fall below 36%.

Months 10–12: Learn the Ins and Outs of the Mortgage Process

Do your mortgage application prep. Your mortgage company will require quite a bit of paperwork to get your loan approved. Complete what’s necessary and be sure to ask about the application, origination, and lender fees up front so you don’t get blindsided late in the game. Also check your credit score once more to make sure it’s still solid.

Related: Adjustable Rate Mortgage vs Fixed Rate Mortgage

Explore homebuyer assistance programs. In addition to a Federal Housing Administration (FHA) loan, there are home upgrade options, such as the Energy Efficient Mortgage (EEM) program. The EEM program can provide benefits if, for example, you’re looking into buying a green home. If a fixer-upper is your goal, the HUD 203(k) loan is worth exploring. And depending on where you’re looking to buy, you might find city- or state-specific homebuyers assistance programs.

With focus, drive, refinancing, and some lifestyle changes, you can boost your savings fast to buy your first home.

Download the SoFi Guide to First Time Home Buying to get valuable tips on these topics and more. Our guide also demystifies modern mortgage myths around down payments, the pre-approval process, student loans, rising interest rates, and more.

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ABOUT Jackie Lam Jackie Lam is a personal finance writer and creator of the blog Cheapsters. When not writing about money she enjoys roller derby, volunteering, and writing fiction.


5 thoughts on “Your 12-Month Master Savings Plan to Buying Your First Home—While Paying Down Student Loans

  1. 50% of working adults in the U. S. don’t earn more than $30,000 a year. But I’m sure they’ll appreciate being told they can “easily” save $1,200 a week if they want a house.

    • Justin Waldman says:

      In that case I guess the ideal house range will have to be below $200,000 for those making less than $30,000 Year. Love how Sofi assumes that every person who saves money makes over $30,000 a year.

    • Natasha E Mitchell says:

      I agree

    • I think she was specifically focusing on the intro home prices in California, which she stated was around 450k. Home goals much cheaper than that 250k or 150k won’t require 1,120/wk. 250k home would require maybe 625/wk, 150k home 375/wk.
      Don’t think she was being inconsiderate or unrealistic, just giving people an idea on how to begin saving or better yet what to consider before setting goals on home buying.

      I appreciated the article.

  2. Yeah this is kind of ridiculous…nice to publish the average starter home price, but what about average salary in these places. How many people have a take home pay of nearly $5000 – probably not many is they are putting anything toward retirement. Plus this doesn’t even account for existing expenses like rent, utilities, and the student loan. Love SoFi, but this article misses the mark

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