Best ways to save money to buy a house
Buying a house in New Hampshire is a significant milestone, but for many, it’s also one of the biggest financial challenges. With rising home prices, inflation, and other expenses, saving up for a down payment can feel like an overwhelming task. However, with careful planning and disciplined saving, it’s entirely possible to build up the funds you need. Here’s a comprehensive guide on how to save money to buy a house.
1. Set a realistic goal for your down payment
The first step to saving for a home is to understand how much you need. A typical down payment is 20% of the home’s purchase price, but this can vary based on the loan type and your financial situation. Many first-time homebuyers put down less—often 3% to 5%—especially if they qualify for programs like FHA loans or VA loans.
To set a goal, do some research on the housing market in your desired location. Once you know the average home price, calculate how much you’ll need for a down payment. Don’t forget to account for other costs like closing fees, home inspections, and moving expenses.
Example: If the median home price in your area is $300,000, a 20% down payment would be $60,000. On the other hand, with a 5% down payment, you’d need $15,000.
2. Create a budget and stick to it
To save effectively, you need to know where your money is going. Creating a budget allows you to track your income, expenses, and how much you can allocate toward your house fund each month.
Steps to creating a budget:
- Track your spending – Use an app or spreadsheet to monitor all your monthly expenses, from rent to groceries to entertainment.
- Cut back on non-essentials – Identify areas where you can reduce spending, such as dining out, subscriptions, or impulse purchases.
- Allocate savings – Set a fixed amount to put toward your down payment each month. Treat it like any other bill—if possible, automate it so you’re less likely to spend it elsewhere. Even small, consistent savings can add up over time. For example, saving $500 a month for 24 months would give you $12,000 toward your down payment.
3. Open a high-yield savings account or a CD
When you’re saving for a down payment, you want to make your money work harder for you. A high-yield savings account or a certificate of deposit (CD) can offer higher interest rates than a standard savings account, helping your savings grow over time.
- High-Yield Savings Account – These accounts typically offer interest rates between 3% to 5% annually, which can help you earn more money on your savings.
- CD – If you don’t need access to the money for a certain period, a CD could offer a higher interest rate in exchange for locking in your money for a few months to several years.
Before you choose, compare interest rates and fees from different banks to find the best option for you.
4. Cut back on debt
High levels of debt can make it harder to save for a house and can also impact your credit score, which is essential when applying for a mortgage. Try to pay down high-interest debt, like credit cards, as quickly as possible. You can also work on reducing monthly debt payments by consolidating loans or refinancing.
Tips for paying down debt:
- The debt avalanche method – Focus on paying off the debt with the highest interest rate first.
- The debt snowball method – Start with the smallest debt first to build momentum as you pay it off.
- Automate payments – Set up automatic payments to ensure you stay on track and avoid late fees.
The less debt you have, the more money you can allocate toward your house savings, and the better your financial position will be when applying for a mortgage.
5. Increase your income
If your current salary doesn’t allow you to save as quickly as you’d like, it might be time to consider ways to increase your income. Here are some ideas:
- Take on a side hustle – Freelancing, tutoring, pet sitting, or driving for a ride-share service can provide extra cash.
- Ask for a raise or promotion – If you’ve been with your current employer for a while, consider discussing a raise or a promotion.
- Sell unused items – Go through your home and sell things you no longer need, such as electronics, furniture, or clothing.
Increased income means more money for your house fund, speeding up your savings goal.
6. Consider a First-Time Homebuyer Program
Many governments and financial institutions offer programs designed to help first-time homebuyers. These programs may offer lower down payments, reduced closing costs, or even down payment assistance. Here are some options to investigate:
- FHA loans – These government-backed loans allow first-time buyers to put down as little as 3.5%.
- VA loans – If you’re a veteran or active service member, you may qualify for a VA loan with no down payment or private mortgage insurance (PMI).
- Down Payment Assistance Programs – Various state and local programs provide grants or loans to help with your down payment.
Contact one of Mortgage Equity Partners’ experienced Loan Officers to go over your financing options.
7. Cut major expenses temporarily
While this approach isn’t for everyone, cutting major expenses temporarily can significantly boost your savings rate. For example:
- Move back in with parents – If it’s a viable option, living rent-free for a year can save you thousands of dollars.
- Downgrade your lifestyle – Consider downsizing your car or moving to a less expensive neighborhood for a year or two.
- Cancel luxury subscriptions – Take a break from high-end gym memberships, premium TV channels, and other non-essential services.
While these sacrifices may not be permanent, they can help you make significant progress toward your goal.
8. Stay disciplined and be patient
Saving for a home is a long-term goal, and it requires discipline and patience. The key is to stay focused on your goal and avoid temptation. You may want to splurge on a vacation or a new gadget but remember that every dollar spent now could be one less dollar toward your future home.
Creating a vision board, reminding yourself of your goal often, and tracking your progress can help you stay motivated. Celebrate small wins along the way—whether it’s reaching a savings milestone or getting pre-approved for a mortgage.
Final thoughts
Saving for a house takes time, effort, and discipline, but with the right strategies, you can make your dream of homeownership a reality. Start by setting a clear goal, creating a budget, and increasing your savings wherever possible. Consider taking advantage of any first-time homebuyer programs like those offered by Mortgage Equity Partners, cutting back on expenses, or boosting your income with a side hustle.
Most importantly, stay focused and patient. The journey to homeownership in New Hampshire is a marathon, not a sprint. With a solid plan and consistent effort, you’ll get there before you know it! If you have more questions about the homebuying process or mortgages, start the pre-approval process or contact one of our experienced loan officers.
