Are you looking forward to purchasing your first house? There is no neighbor within your walls. Your backyard. A place where you can paint whatever color you want without getting permission from management?! Buying a home can be one of the most exciting events in a house’s life, but saving tens of thousands of dollars for a down payment can be daunting. We understand. And we’ve put together a no-nonsense guide on how to save money for a house or make a down payment fast within 6 months or a year while still renting.
How Much Money Do You Need to Buy a House?
Before we get into the detailed guide on how to save money for a house fast within 6 months or a year while still renting, you should know how much money you need to save for a down payment. Because there are numerous ways to finance a home, we’ll focus on the two most common options for your down payment.
#1. Conventional Loan Down Payment
It is advisable to save up to a 20% down payment for most conventional home loans. This is because most lenders require you to pay private mortgage insurance (PMI) if you do not make a 20% down payment. This can amount to up to 2% of your loan balance per year, which is a significant monthly cost.
#2. Federal Housing Administration (FHA) Loans
FHA loans are government-backed mortgages that are designed to help people with low incomes and average credit qualify for a mortgage. Depending on your credit score and other qualifying factors, you can put down as little as 3.5 percent on a home.
There is mortgage insurance (called MIP) on this type of loan, but it allows you to save much less for a down payment. Always do the math to determine what is best for your financial situation.
How to Save Money for a House Fast
Following these simple strategies on how to save money for a house with a fast down payment, boost your savings rate, and buy your home faster once you’ve determined how much money you need to save for a down payment, you’ll be able to buy your home sooner!
#1. Create a budget
The most effective way to save money is to plan for it! And there is no better way to begin saving money than to create a budget that will allow you to maximize your savings. The best place to begin is by reviewing your current spending. Examine your bank and credit card statements from the last few months to see where your money has gone.
#2. Make do with the new mortgage payment
When purchasing a house, it is always a good idea to begin living on your new mortgage payment BEFORE you purchase the house. This gives you an idea of how life will feel (financially) once you buy the house. The trick is that you can then put the extra money into your down payment fund.
#3. Put your next raise into savings.
When saving for a house, every extra dollar gets you closer to your goal. Consider banking your next raise if you want to get there faster. Whether you go ahead and ask for a raise now or wait until your annual review, if you do, put all of the extra money into your down payment savings account.
#4. Designate it as a “stay-cation” year
Vacations are a lot of fun, but they can be very expensive. Why not forego the trip this year and instead enjoy a stay-cation? There are numerous free and low-cost activities in your city (just Google it), and you can enjoy exploring your hometown while saving thousands of dollars for your new home.
#5. Eliminate ‘ALL EXTRA SPENDING’ (for a short time)
If you are determined to save money for a down payment on a house fast, you should consider challenging yourself to forego all extras. This is the quickest way to increase your savings, but if you are too aggressive with your budget, it may leave you feeling burned out. The simplest way to accomplish this is to only pay for necessities.
#6. Get a side hustle to save even more
If living on a shoestring budget doesn’t appeal to you, consider getting a side hustle to supplement your income and savings.
#7. Clear your debts
“Wait a minute, what?” How does paying off my debt help me get into a house faster?” Although it may appear to be backward, paying off your debt can help you get into a house fast and save money in the long run. When qualifying you for a loan, lenders consider your debt-to-income ratio (DTI), and the lower your debt, the better your terms can be.
#8. Sell your items
Did you know that the majority of us are sitting on hundreds (or even thousands) of dollars and are completely unaware of it? Yes, most Americans have unused items they can sell right now to make hundreds of dollars (while also decluttering their lives)!
Garage sales have been replaced by Facebook Marketplace. It’s simple to take a few photos of your items, add descriptions and prices, and list them online.
Do you need assistance deciding what to sell? Simply open your garage and look for items that you haven’t touched in a year. If you won’t need it for a while and it’s worth $5 or more, list it online and earn some money for your new home!
#9. Make your savings automatic
Making a house down payment automatic is one of the best ways to save money quickly. Have a set amount transferred to your savings account with each paycheck.
How to Save Money for a House in 6 Months
Do you want to be a homeowner? You’re probably picturing the ideal home in your head right now and fantasizing about taking that first step. Saving for a house is a significant undertaking. It is significant financial money.
This is one of the reasons why I recommend saving money for a house for at least 6 months to a year. 6 months or a year gives you plenty of time to research your location, save money for a down payment on a house, and learn the housing details you require.
We’ll show you how to save money for a house down payment in 6 months or a year to maximize your savings goals.
#1. Prepare the groundwork
It’s difficult to set a goal when you only have a hazy idea of what you’re aiming for. To create an actionable plan, you must go beyond simply “saving for a house” and determine where you want to buy as well as how much homes in your desired area cost.
#2. Gain knowledge about your loan options.
The conversation with your mortgage lender should include information on the types of loans you are likely to qualify for. Different loan types have different down payment requirements, which may mean you’ll be able to buy sooner than you think.
#3. Look into down payment assistance programs.
It’s time to look into down payment assistance once you’ve determined how much money you’ll put down on your new house. Your lender can point you in the right direction toward a program that might be a good fit for you, but it’s also worth doing some research on your own.
#4. Decide how much money you’ll need to save.
Now that you’ve done your homework on house prices, loan types, and down payment assistance, it’s time to put a number to your home savings goal.
#5. Set up automatic deposits to your savings account.
Set up automatic transfers into your home savings account while we’re on the subject of your bank account. It’s up to you whether you do this weekly or monthly, but having your money moved directly into savings — rather than logging in and manually transferring the funds — will help you avoid the temptation to spend it elsewhere.
#6. Freeze entertainment and luxury accounts
Dollars do add up, and eliminating unnecessary expenses is a great place to start. If you have multiple streaming services, consider reducing your subscription to just one. Or, even better, can you cancel them all and temporarily borrow a friend’s login for your favorite service?
#7. Adjust your belt.
When you have a significant savings goal in mind, cutting back on expenses shouldn’t be limited to luxury subscriptions. It’s time to make some cuts everywhere. However, it is critical to be realistic.
How to Save Money for a House While Renting
If you’re struggling to save for a house in a year while renting and don’t know how to maximize your down payment, we have a few suggestions.
#1. Save money on rent
One of the first ways renters can save money for a house while renting is to reduce the amount of rent they pay. There are several approaches you can take:
- Move to a smaller or less expensive apartment.
It may seem counterintuitive because you must first have money to move (security deposit, first month’s rent, and money to move and turn on utilities), but moving to a new place could save you hundreds of dollars each month.
- Look for a roommate.
While this is not a one-size-fits-all strategy, if you have a spare room that can be rented out for a short period, you can easily add hundreds of dollars to your house savings account. If a 24-hour roommate isn’t for you, and Airbnb approach may be an option if you live in an area with a high number of out-of-town visitors.
#2. Rethink the small luxuries in your life.
We enjoy our streaming subscriptions, food deliveries, fine wines, and self-pampering days at the salon, but these activities aren’t necessities — they’re little luxuries that make us happy. These small luxuries, while appearing small on the surface, can quickly consume a large portion of your budget if you are not careful.
#3. Look for ways to save money on already necessary services.
It’s difficult to figure out where you can save money for a house while renting, especially when it comes to deciding which luxuries to forego. It’s also difficult to find ways to cut back on those necessary services and goods, so make sure you’re truly prepared to make these sacrifices!
#4. Have a solid savings plan.
What is the size of your savings account? If you’re like 69 percent of Americans, you probably have less than $1,000 in your savings account. There are high-yield savings accounts available, but they are not truly high-yielding. The country’s largest banks appear to offer the absolute lowest savings rates.
Conclusion
Implementing just one of the ideas in this guide on how to save money for a house fast within 6 months or a year while still renting may not significantly increase your savings, but if you try a few of them, it can make a significant difference to your savings account after a few months and get you on the right track to having enough for your new home.
How To Save Money For a House FAQs
How do I save for a new house?
To save money quickly for a house, take a multi-pronged approach: cut extra expenses where possible, set aside raises, tax refunds, and other windfalls, take on a side gig to earn extra income and keep your savings in a high-yield savings account.
How can I cut costs at home?
- Install a personal finance app.
- Plan your meals and cook at home.
- Make a shopping list.
- Cancel cable TV to save money on entertainment.
- Reduce your electricity consumption.
- Invest in smart home technology to save money.
What is the 30 day rule?
The 30-day savings rule requires you to postpone all non-essential and impulse purchases for 30 days. Instead of spending your money on something you might not need, you’re going to think about it for 30 days. If you still want to make that purchase at the end of the 30-day period, feel free to do so.
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