{"id":1044,"date":"2022-11-03T14:40:06","date_gmt":"2022-11-03T14:40:06","guid":{"rendered":"https:\/\/www.upromise.com\/articles\/?p=1044"},"modified":"2022-11-03T14:40:07","modified_gmt":"2022-11-03T14:40:07","slug":"how-to-save-money-for-a-house","status":"publish","type":"post","link":"https:\/\/www.upromise.com\/articles\/how-to-save-money-for-a-house\/","title":{"rendered":"How to Save Money for a House"},"content":{"rendered":"\n

A home is more than a place to hang your hat. Owning a home is also a great investment that can set you up for greater financial stability in the future. In more than half of the country, it\u2019s cheaper to own<\/u><\/a> a house than it is to rent. Not only that, but part of every mortgage payment goes toward building equity in your home, which you can access if you\u2019re facing hardship. <\/p>\n\n\n\n

But there are many barriers to homeownership<\/u><\/a>. Many people struggle with maintaining a good credit score, which is essential to getting an affordable mortgage. Prospective home buyers also struggle to save enough for a down payment, and many are not aware of down payment assistance programs. And rising mortgage rates and other economic pressures<\/u><\/a> are making matters worse. <\/p>\n\n\n\n

However, homeownership can be achievable if you start early and save aggressively. Here\u2019s what you need to know about the home-buying process, so you can save enough money to purchase your dream home.\u00a0<\/p>\n\n\n\n

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How Much Should I Save Before Getting a House?<\/h2>\n\n\n\n

That depends on the home\u2019s purchase price and the type of mortgage you plan to use. Government-backed mortgages require less cash upfront, but they come with drawbacks. To avoid costs such as mortgage insurance, you\u2019ll want to save 25% of the home price to account for the downpayment and closing costs, such as title fees and a home inspection. This will also help ensure your monthly payments stay manageable. <\/p>\n\n\n\n

But if that seems out of reach for your first home, it\u2019s possible to secure your first mortgage with as little as 3% down<\/u><\/a> plus closing costs. If you don\u2019t qualify based on your creditworthiness, you can also get an FHA loan, which is backed by the Federal Housing Administration, with as little as 3.5% down. If you are a veteran, you may be able to get a VA loan with $0 down, and if you live in certain rural areas and meet the requirements, you can get a USDA loan with $0 down as well. Just keep in mind, you\u2019ll pay mortgage insurance premiums with USDA loans, VA Loans, and FHA loans \u2014 unless you can put 20% down, this is unavoidable. <\/p>\n\n\n\n

Additionally, local grants and assistance programs are often available for low-income home buyers, and affordable housing programs can make it easier to buy a home if real estate prices in your area are out of reach. If you\u2019re not sure what home price you should be aiming for, you can use a calculator<\/u><\/a> to determine how much house you can afford based on your income. <\/p>\n\n\n\n

Remember to account for moving expenses as well, and if your new home will need repairs, be sure to build the cost into your monthly budget. An experienced real estate agent can help you navigate the home-buying process, including determining your home-buying budget.\u00a0<\/p>\n\n\n\n

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How Long Will It Take Me to Save Up for a House?<\/h2>\n\n\n\n

To achieve a 20% down payment on a median-priced home, the average renter will have to save 10% of their income for 7 years and 11 months, 2021 analysis shows<\/u><\/a>. But the time it will take for you may vary based on your income and the cost of living and housing prices in your area<\/u><\/a>. It\u2019s best to start saving as soon as possible and contribute as much money as you can to your down payment fund.\u00a0<\/p>\n\n\n\n

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What\u2019s the Best Account to Save for a House?<\/h2>\n\n\n\n

The right financial product for you will depend on your timeline. If you\u2019ll be purchasing a home within three years, it\u2019s typically best to store your savings in a high-yield savings account or money market account. These accounts accrue more interest than a traditional checking account. The upside of rising interest rates is that you can get an annual percentage yield of up to 2% or more from these accounts. That means the money you save will grow, so you can reach your financial goals faster. <\/p>\n\n\n\n

If it will take you three years or longer to save for a house, you may also consider investing conservatively with an investment account. But you should maintain at least 40% of your portfolio in bonds rather than the stock market unless you won\u2019t need the money for 10 years or more. There\u2019s greater risk involved with keeping your money in an investment account, but it\u2019s also possible to earn greater returns.\u00a0<\/p>\n\n\n\n

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At What Age Should You Start Saving for a House?<\/h2>\n\n\n\n

The later you start, the more you\u2019ll have to save each month to achieve homeownership. It\u2019s best to start saving for a house in your 20s, even if you can only put a little bit of cash away each month. To reach your savings goals, it\u2019s important to keep a budget. If there isn\u2019t money left to save after you\u2019ve covered your other expenses, consider picking up a second job or side hustle.<\/p>\n\n\n\n

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How Can I Save Money for a House Fast?<\/h2>\n\n\n\n

The best way to save for a house fast is by cutting your living expenses while increasing your income. First, add up all your sources of income and subtract your recurring expenses, such as rent and utilities. Divide what\u2019s left over into spending categories, and look for areas where you can cut back. Determine how much you\u2019ll have left to save, and fund your savings account with an automatic withdrawal each month. You should also save any windfalls that come your way, along with your tax refund. <\/p>\n\n\n\n

At the same time, look for ways to earn additional income. Here are a few ideas to earn more money, so you can bolster your savings accounts and money market accounts.\u00a0<\/p>\n\n\n\n

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Work in the Gig Economy<\/h3>\n\n\n\n

The best side hustles allow you to work on your own schedule, so you can easily fit it in outside your full-time job. There are options for a variety of interests, and you typically don\u2019t need any education or training. For example, consider pet sitting, food delivery, ridesharing, handyman work, or mystery shopping. <\/p>\n\n\n\n

Start a Freelance Business<\/h3>\n\n\n\n

If you have valuable skills you can provide on a freelance basis, consider starting your own website or advertising your services on Fiverr. Set a competitive rate and collect testimonials so you can get more clients.<\/p>\n\n\n\n

Accept Gift Money<\/h3>\n\n\n\n

If your family members plan to leave you an inheritance, talk to them about passing some of their wealth to you now through nontaxable gift money. This strategy has advantages for the donor and the recipient. <\/p>\n\n\n\n

Turn Your Free Time into Extra Cash<\/h3>\n\n\n\n

If you don\u2019t have time for a second job, you can still earn extra money in your free time with Swagbucks. You\u2019ll earn points for taking surveys, watching videos, playing games, surfing the web, and more. You can easily cash out when you have at least $3 in SB (points), and that extra income can go straight to your house fund. <\/p>\n\n\n\n

Earn Cash Back for Spending Money<\/h3>\n\n\n\n

Take advantage of opportunities to earn cash from the shopping you do anyway. Use Upromise Shopping<\/a><\/u> to earn cash back and save with coupon codes, and use a cash-back credit card when you make your purchases as well.\u00a0<\/p>\n\n\n\n

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How Much Do I Need to Save for a $200K House?<\/h2>\n\n\n\n

It depends on the type of mortgage you\u2019re getting. To achieve the lowest monthly payment and avoid private mortgage insurance, FHA mortgage insurance premiums, or the VA funding fee, you should save 20% of the home\u2019s purchase price, plus 5% for closing costs. Here\u2019s how much you should save with each type of loan:<\/p>\n\n\n\n