You may want to become a homeowner but aren’t sure how you’re going to save up for your down payment. Typically, you’re going to need at least 3% to 5% for a down payment for a conventional mortgage, or 20% on a loan that doesn’t require private mortgage insurance.
Thankfully, there are a number of methods you can use to stash away money for your future home. Here are some of the best ways to save for a house and get you one step closer to your dream.
1. Creating a Budget
Living on a budget may not be easy, but in the long run it can help you save money to put toward a home purchase. Creating a budget so you know where your money is going is a good first step in a house savings plan. Some good ways to do this are recording expenses in a spreadsheet or using a budgeting app to determine your spending practices and see where changes can be made to meet your savings goal.
2. Using Cash Envelopes
It might be harder to part with cash than it is to swipe a debit or credit card. The cash envelope budgeting method is simply distributing cash each month (or pay period) into envelopes based on your budget categories. When you’re out of cash, you stop spending.
3. Deleting Your Stored Cards
Do you store your payment information on Amazon or other e-commerce stores? Then it’s time to consider deleting them from each store or from your browser settings. If you have to manually put in your card each time you want to make a purchase, you may just stop spending so much money online.
4. Downsizing Your Life
Another one of the tips for saving for a house involves downsizing your life. This could mean moving to a smaller rental or moving to a more affordable area of town. Just keep in mind that there is always a flip side to downsizing. For instance, your smaller apartment may not include parking, so you might be taking on an expense you didn’t have before. Moving to a different part of town might mean spending more on transportation costs getting to work each day. It’s a good idea to weigh the pros and cons before making any big decisions.
Recommended: 25 Ways to Find Affordable Housing
5. Setting Up Automatic Transfers
Reaching your savings goals might happen faster by setting up automatic transfers from checking account to savings account each time you’re paid. If your paycheck is direct-deposited, you may also be able to split the deposit into more than one account, on a percentage or dollar-amount basis.
Recommended: Four Savings Goals You Can Reach in 2021
6. Postponing Vacation
This method can reap plenty of savings if your usual vacation is a costly one. Instead of taking a big trip, a staycation may be entertaining and less expensive. Check out your local newspaper’s website to find free activities and events. Art museums sometimes offer free admission days, and area nature trails are generally free and can be a good way to have fun and get exercise in one fell swoop. Now is the time to be creative since you’re working on your house savings plan.
7. Tackling Your Debt
If you get.50% APY in your high-yield savings account, but you carry a credit card balance with an interest rate of 15.99%, it may make more sense to put your money towards your debt right now rather than savings.
8. Eating at Home
Dining out is expensive. The average American household spends more than $3,000 per year on eating out. Skipping the takeout and restaurants and cooking your meals at home can see that money added to your house savings plan.
9. Making Your Own Coffee
It’s a cliche, but it’s true: If you skip the lattes, you could boost your savings. The average American spends $92 per month on coffee, which adds up to about $1,100 per year. Purchasing a coffee maker and brewing your own cup of joe as opposed to hitting up a coffee shop every day will likely improve your home savings plan.
10. Using Coupons at the Grocery Store
Looking for coupons in your local newspaper for items you normally buy anyway can trim your grocery bill. Coupons can also be found on coupon websites and on brands’ websites.
Recommended: Tips for Grocery Shopping on a Budget
11. Buying Things on Sale
Just because you want something doesn’t mean you need to have it right away. Waiting to buy things when they go on sale is another of the best tips for saving for a house. Along with looking at stores’ mailers, you could always create a Google alert to find out when things go on sale by typing in your favorite stores’ names + sales on Google Alerts.
12. Using Promo Codes
Similar to presenting a paper coupon to an in-store cashier, promo codes are like coupons for online purchases. Browser extensions that search the web for deals can bring those promo codes to you and save you precious search time and effort.
13. Cutting Out Cable
Cable television can be a major monthly expense for some households, sometimes hundreds of dollars every month. One of the best ways to save is to cut the cord, switch to streaming services, and potentially pay much less per month on your favorite entertainment.
14. Canceling Your Subscriptions
You may be spending money on monthly subscriptions without realizing how much. Canceling subscriptions to things like lifestyle boxes you aren’t using anymore or magazines you don’t read can add up to significant savings.
15. Making the Most of the Library
The local library is a fantastic resource. You can borrow books, magazines, and movies instead of buying them, and some libraries even offer access to free audiobooks. Libraries are funded by taxes, so you’re probably already contributing to this resource—there’s little reason to pay twice for items it provides as a public service.
16. Canceling Your Gym Membership
Gym memberships can be pricey, but exercise is not. Using free, online workout videos and things in your home as exercise equipment (e.g., stepping on your stairs, doing wall or table pushups, or using a chair for barre exercises), or walking around your neighborhood can save money over a gym membership.
17. Shopping Around for Insurance
You may be overpaying for insurance. Comparing rates and getting different quotes for your car, renter’s, pet, health, and other types of insurance can ensure you’re getting the best deal possible.
18. Steering Clear of Checking Account Fees
Is your bank charging you a monthly maintenance fee just to keep your account open? If so, it might be worth looking into switching banks or asking your bank how you can avoid these fees. For example, if you have a direct deposit into the account or maintain a minimum daily account balance, you may be eligible for a fee-free account.
19. Selling Your Stuff
Do you have things you never use anymore? Could they fetch some cash? Holding a garage sale or selling your stuff online might net a few dollars to add to your house savings plan. You’ll probably want to buy new things for your new home anyway, and selling your old things will allow you to save up.
20. Asking Your Boss for a Raise
During your annual performance review, consider asking for a raise, highlighting your accomplishments and why you deserve more money. Be specific about improvements you’ve made to the company by backing up your accomplishments with data.
21. Switching to a Better Job
If you aren’t making enough money in your current position, then consider switching to a higher-paying job. It’s a good idea to keep your current job until you find a new one, though.
22. Taking on a Side Hustle
If you have the time and energy, earning extra money on nights and weekends might be an option. For instance, you could start a dropshipping business, freelancing, or doing affiliate marketing.
23. Signing Up for a Travel Rewards Credit Card
If you need to travel or you are still planning a vacation, using a travel rewards credit card may be a good idea. These cards offer certain rewards for different categories such as travel, gas, and dining out, and allow you to put your rewards towards flights, hotels, rental cars, and more. Plus, many of them offer other ways to save, such as providing you with rental car and baggage delay insurance or no foreign transaction fees.
24. Getting a Cash Back Credit Card
With a cash-back credit card, you can earn cash rewards every time you spend. Putting that cashback toward a statement credit or bank transfer will help accelerate your savings.
25. Renting Your Spare Room
If you have an extra room in your apartment that you aren’t using, you could get a roommate or list it on a rental site to reduce your overall living expenses. Just make sure that you get permission from your landlord before inviting anyone else to move in.
26. Renting Out Your Storage Space
Another one of the best ways to save for a house is to rent out your unused storage space on a peer-to-peer site. You could generate income without having to do much work at all, and you won’t have to live with someone else—just their stuff.
27. Making Your House Savings Plan Known
Your Aunt Mildred may always get you boxes of chocolates for your birthday, and your dad might give you gift cards for Amazon. But letting your family and friends know you’re trying to save for a home might plant the seed for them to give you cash instead. If you’re getting married, this is a time to tell people about your plans so that instead of registry gifts, they might give you cash for your future home.
28. Opening a High-Yield Savings Account
Putting your money into a regular savings account may not result in much of a return. However, putting money in a high-yield savings account may net more interest and get you closer to reaching your savings goals. A high-yield savings account typically offers 20 to 25 times the national average of a typical savings account.
29. Hiring an Accountant at Tax Time
If you’ve been doing your taxes on your own every year, you may have missed potential tax savings you might be eligible for. A tax professional may be able to maximize your savings, possibly resulting in a larger refund, or minimize taxes you owe.
30. Saving Your Tax Refund
If you get a tax refund, consider saving it instead of spending it. The money can be a nice addition to your down payment, possibly even earning interest in high-yield savings account until you need it.
31. Changing Your Tax Withholding
Among the best ways to save for a house is by keeping more money from your paycheck. If your withholding is too high, the IRS is essentially holding your money for you all year round. Instead of getting a large tax refund, keeping your money now and investing it in an interest-bearing account will help you save up for your home.
With SoFi Money®, you may be able to save even more money for your home and reach your savings goals that much quicker. SoFi’s cash management account earns competitive interest rates without charging account fees. And with fee-free in-network ATM access, you can save, spend, and earn all in one account.
Photo credit: iStock/Talaj
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
The SoFi Money® Annual Percentage Yield as of 03/15/2020 is 0.20% (0.20% interest rate). Interest rates are variable subject to change at our discretion, at any time. No minimum balance required. SoFi doesn’t charge any ATM fees and will reimburse ATM fees charged by other institutions when a SoFi Money™ Mastercard® Debit Card is used at any ATM displaying the Mastercard®, Plus®, or NYCE® logo. SoFi reserves the right to limit or revoke ATM reimbursements at any time without notice.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.