How much money should I save before buying a house?

Thinking about changing your title from “renter” to “homeowner?” If you’re tired of scrolling through listings late at night and ready to take the plunge into the homebuying market, understanding how much you need to save before buying a house is vital. This dream comes with an often-steep price tag, and knowing the costs inside-out will make your financial groundwork as solid as the house you seek.

What are the main home costs to save for?

The most important expense for most would-be homeowners is the down payment, which typically varies from 5% to 20% of the home’s purchase price. In the U.S., the median home price hovers around $417,000 as of 2023, but that’s not the end of it. Closing costs, which can include everything from lender fees to taxes and insurance, should also be on your radar. Then, there’s the often-overlooked cost of moving, and potential immediate renovations or furnishings. 

Here’s a breakdown of what you can expect to save for upfront:

Down payment

The down payment is a significant upfront cost that serves as a security margin for lenders. Traditionally, the benchmark is 20%—a $70,000 lump sum on a $350,000 home. But with programs offering lower percentages, such as FHA loans requiring as little as 3.5%, options can vary. Higher down payments mean lower monthly mortgage payments and less interest accrued over the loan’s lifetime. It’s arguably the most critical figure in your home purchase savings plan.

Closing costs

Closing costs, which include a mix of lender and third-party fees, as well as prepaid items like interest and insurance, can surprise buyers. They typically run between 2% to 5% of the home’s purchase price. They’re often negotiable during the closing process, but it’s wise to have a buffer in your savings to cover any unexpected fees.

Moving expenses

Be prepared for a host of moving costs—whether you’re hiring a professional moving company, renting a truck, or even just stocking up on packing supplies. Expect to pay for gas, moving supplies, truck rental fees, storage, and even a hotel stay if you’re moving more than a short distance from where you’re renting.

→ Learn more about the average cost to move

Renovations and furnishings

Your new home may need a fresh coat of paint, some new appliances, or an updated bathroom. These costs can add up quickly and it’s helpful to have a cushion to make those personalized home improvements. Also, consider setting aside funds for new furniture and décor to make your house a home.

What are some additional home costs that can come up?

There are several less-obvious costs that might catch first-time homebuyers off guard. Maintenance can’t be stressed enough, and a great rule of thumb is to save at least 1% of your home’s value each year for repairs. Lawn care, snow removal, and pest control are also ongoing costs homebuyers often don’t consider. Property taxes and homeowner’s insurance, which are generally rolled into a monthly mortgage payment, should also be factored into your budget.

Ongoing maintenance

A beautiful home doesn’t stay that way without regular care. A budget line for home maintenance, including HVAC servicing, gutter cleaning, and occasionally mending the roof, should never be ignored. You might also need to invest in new appliances or systems over time, which can be a considerable but necessary expense.

Here’s your ultimate home maintenance checklist

Yard and property services

If you’re moving from an apartment, lawn care or snow removal might be new items on your to-do list—or at least your budget. Whether you’re paying for services or equipment, the outdoor space is part of your overall homeownership costs.

Property taxes and insurance

Annual property taxes vary greatly by location—ranging from 0.18% to 2.5% of a home’s assessed value. Homeowner’s insurance adds another $35 to $100 per month, on average. These recurring costs ensure that your investment remains protected and compliant with your mortgage terms. Often, these costs are escrowed and built into your monthly mortgage payment. 

Homeowners Association (HOA) Fees

If your home is in a managed community, HOA fees can range from $200 to $400 per month on average; however, it depends entirely on where you choose to live. They may cover various community services and amenities, but it’s a cost that should be included in your monthly housing budget.

How can I save enough money to buy a house?

Now that we’ve detailed the litany of costs associated with homebuying, the next logical question is how to tackle saving for them. There are numerous strategies—some involving smart financial tactics, others about making day-to-day adjustments to your spending habits. A mix of these methods can help you save faster and more effectively.

• High-interest savings accounts: High-yield savings accounts can be a boon for your finances. These accounts typically offer better interest rates than traditional savings accounts, ensuring that your money grows over time, albeit modestly.
• Automatic transfers: If you can swing it, set up automatic transfers from your checking account to your savings account every pay period. You’ll keep to your savings goals without even thinking about it.
• Downsize your current living situation: One of the best ways to save money is to consider moving to a less expensive home or neighborhood, or even living with family temporarily. Downsizing will likely feel like a sacrifice, but each month saved on rent translates to more money toward your house fund.
• Cut extraneous expenses: Evaluate your monthly expenses and look for areas you can cut back. This might mean canceling subscriptions, reducing eating out, or shopping more mindfully.
• Make additional income: Explore side hustles or part-time work to increase your income. You could also consider selling items you no longer need—every dollar made is a dollar toward your home fund.
• Take advantage of government programs: Research and see if you qualify for government assistance or first-time homebuyer programs. Some could offer grants or reduced-interest loans, significantly decreasing your upfront costs.

How long does it take to save for a house?

The time it takes to save for a house varies dramatically depending on location, income, and spending habits. On average, it takes people 6 years to save for a 20% down payment on a house. Luckily, there are ways to accelerate the process.

• Increase your income: Whether it means getting a higher-paying job, working overtime, or starting a business, the more money you bring in, the quicker you’ll reach your home savings goal.
• Lower your housing costs: Are there ways to decrease your current housing costs? This could mean finding a roommate, negotiating a lower rent, or moving to a less expensive area.
• Invest in stocks or real estate: If you have a longer timeline and are comfortable with the risk, consider investing your home savings in the stock market or real estate. This could potentially grow your savings more quickly but be sure to do your research and understand the risks.
• Use windfalls wisely: If you receive unexpected financial windfalls, such as a tax refund or a work bonus, funnel these directly into your house savings.
• Refrain from using credit: Avoid accumulating credit card debt or taking out personal loans during this period. Paying high interest on these debts will only slow you down.

→ Learn how to save for a house while renting

How to save on the biggest home expenses

While every cost associated with buying a house is significant, for most people, the single largest expense they need to save for is the down payment. It’s a substantial sum, and the more you can save for this, the lower your mortgage payments and interest rate are likely to be. Saving diligently and planning ahead for this monumental cost is key.

• Strategies to save for a down payment: Get strategic about saving for your down payment. Open a dedicated savings account, maintain a strict budget, and consider alternative revenue streams. You might also want to pause on large discretionary purchases and focus on growing your income while minimizing your expenses. 
• Cleaning up your credit score: Before buying a house, a good credit score is non-negotiable. This directly impacts how much your mortgage will ultimately cost, as a higher score can net you a lower interest rate. Therefore, cleaning up your credit should be a significant part of your savings plan.
• The importance of pre-approval: Getting pre-approved for a mortgage saves time, reduces stress, and shows sellers that you are a serious buyer. It can also give you a better idea of your total home-buying budget. Having a set loan amount is essential when considering which homes you can afford.
• Stick to your budget: Discipline is crucial when saving for a home. Create a budget that allows you to save consistently while still meeting your other financial obligations. Sticking to this budget even when tempted to splurge will pay off in the long run.

How long does it take to save for a house?

If you know you want to purchase a house and you aren’t already saving, it’s time to start. Every little bit helps since, as we’ve seen, you’re going to need a lot of cash to do it.

Depending on your income and ability to save, you could save up for your dream home in as little as a year, or it could take a decade. Student loans and high rent prices have made it difficult for millennials to buy homes and, when they do, 64% regret it often because of high mortgage and maintenance costs. That’s why it’s so important to strike a balance between putting down a substantial down payment without depleting too much of your savings. Homes never stop costing money—you need the money down to keep your monthly costs lower while maintaining a safety net for future unforeseen costs.

Let’s say you want to buy a home for $300,000, with a 10% down payment. You’ll need $30,000 for the down payment and up to $15,000 in closing costs. That’s $45,000, and you’ll have to decide how much of your savings you’re comfortable spending on one purchase. (And most financial advisors will tell you: Don’t withdraw from a 401(k) or pension fund to purchase a house—the tax penalties are not worth it.)

So how do you get there? Saving 20% of your income is a good goal. If you make $60,000/year and started with no savings, saving $12,000/year would have you at that $45,000 threshold within four years. If you’re comfortable putting less than 10% down, you could be there even sooner.

→ Learn how to save for a house while renting

Experience the joy of homeownership

To state the obvious: it takes time to build up your savings, find the right home, and complete all the necessary steps on the path toward homeownership. Be patient and stay focused on your goals, and know that the reward is worth the wait.

In the end, planning to buy a house is about more than just making money. It involves smart financial management, evaluating your priorities, and the willingness to make short-term sacrifices for long-term gains. Remember—the satisfaction of reaching your homeownership goal will not only be about the house you’ve purchased, but also about the financial discipline and knowledge you’ve gained along the journey.

There’s no easy answer to how much money you should save to buy a house. The best answer is what you’re comfortable with. You should have enough money to make a large enough down payment to keep your monthly mortgage payment below 25% of your monthly income. That down payment amount shouldn’t be so large that it depletes your savings. Every situation requires some unique math and different risk tolerance, but this guide should have given you a better idea of what you’ll need to consider in your home buying calculus.