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Owning your own house may seem off in the distance, something unreachable. And so you are content to rent.
But don’t be! Owning your own house is one of the best investments you can make in your life. Each month that you pay rent, you are literally purchasing a home FOR someone else.
You are paying their mortgage off, or better yet if they have no mortgage now, you are just making them rich!
So, it’s time to stop doing that! And start learning how to save money for a house while renting.
Why not put the same amount of money each month into your own house, so that someday if you want to sell it you get it all back, plus some. Saving money for a down payment may be the only thing holding you back.
It is not nearly as hard as you think to get your own real estate. You can actually purchase a house for as little as 3.5% down if you are. a first-time home buyer! That means if you find a cute little house for $150,000, all you need is $5,250 saved for a down payment.
If you haven’t started saving for your own home down payment yet, start today!
Here are 11 easy ways to save Up for a house
Saving up enough money for a down payment is easier than you think! Stick to these 10 easy tactics and you will be well on your way to skipping rent.
1. Create a budget and stick to it
Its hard to save a down payment when you aren’t keeping track of where you are spending. If there’s nothing to hold you accountable, the spending comes too easily!
Create an actual budget today. Write down all your expenses, bills, rent, insurance etc. Subtract everything you have to pay, from what you make.
And, then you can know exactly how much extra there is each month that you can put into savings to buy a house. Make a line item for entertainment, but don’t overspend that!
Write down the amount you can and should be saving each month, and hold yourself to stick to that goal.
You can also use budgeting strategies like the envelope system. Here are 9 cash envelope categories to help you start envelope budgeting if you want to try that.
Here are 21 Downloadable Budgeting Templates you can use to help yourself keep track.
Not sure how you should budget your money exactly? Here are 3 guides to saving you can use:
2. Drop UNNECESSARY expenses
When you write down all your expenses to create your budget, carefully review each item for things to cu out or cut back on.
If you are paying $160 a month for cable, but could drop to a cheaper program that is $120 do it. And then put that money into a savings account for a down payment on a house instead.
Trust me, you will enjoy that cable much more when you are watching it in your own home!
Look for bills that can be reduced or cut altogether. Paying someone to mow your lawn? Do it yourself for a few months!
If you find several bills to reduce, and a couple to remove you could end up with a couple hundred extra to save for a house each month. You can even save on your cell phone bill by switching carriers to Consumer Cellular.
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Instead of paying for a gym membership, just work out at home for free. If you just save an extra $200 a month, you’ll have that $5,000 down payment for a home in two years just from that!
3. Stop Bad Spending Habits
Take a look at any bad spending habits you may have as well. Maybe you get a $4 latte a few times a week, or you always eat lunch out instead of packing one.
These types of small splurges can add up to a lot of money. You may be able to increase your savings account by a lot just by cutting these expenses out.
Try these tips for living below your means to help drop even more expenses and save for a house quickly.
More reading: How Long Does Credit Repair Take?
4. Open a New, Dedicated Bank Account
If you need to help your motivation and spending control, consider opening a new savings account that is dedicated to your down payment savings.
Having a separate account may help you stay motivated to sinking money into it. Plus, you can set up a direct deposit from your paycheck each month straight into that account to help.
Here are two solid options with benefits:
5. downsize your lifestyle so you can buy your own home
One of the most effective ways to put aside money to buy your own home is to downsize your lifestyle. For instance if you have a super new car with a super hefty monthly payment, consider ditching it. Turn it in for an older, less expensive car so you can save.
The good news is, once you’ve save enough money for a down payment, you can always upgrade your car again.
The short term sacrifice of a cheaper car is worth it in the long run. Some other ways to downsize might be to get a roommate if you have an extra room to rent. Or to stop spending money on clothes or eating out for a few months.
There are many frugal living tips you can adopt to help you downsize your lifestyle and save more money for a down payment on a home.
6. set up automatic withdrawals for savings
If you find it hard to trust yourself to have enough extra to save at the end of the month then set it up automatically.
Create an automatic direct deposit or withdrawal from your paycheck straight into a savings account for the day you get paid. That way the money is already gone and you can’t use it that month!
Just make sure you are using a high yield savings account like this one from CIT Bank. A high yield savings account means your down payment fund will be earning money while it sits there!
There are a lot of automatic savings apps out there that will help you. My favorite is Acorns, which rounds up your spare change every time you make a purchase and places into savings.
But the best part is it uses that change to create an investment account and purchase stocks so you are making even more than you saved!
7. make extra income to save money to buy a house
If you want to know how to quickly save for a house, the answer is to make more money!
My favorite way to quickly save money for a down payment on a house, or any personal finance goal really, is to increase your income over just your day job.
The fastest way to save is to increase your income. You can take a part-time job, or start your own side hustle to kick up your savings account.
Let’s say you take an extra job on weekends waiting tables at a restaurant, or babysitting for the neighbors. It could add up to $1,000 or more a month in extra money.
Getting back to that $5,000 down payment, that means you could save up enough to buy a house in just 5 short months!
Plus, as an added bonus, you might have fun and meet new people. Just write down your savings goal and then work to meet it.
If you want more flexibility than a part-time job may offer, then start your own side hustle.
Here are several ways you can earn extra cash to help yourself save for a house:
- Sell arts and crafts products on Etsy
- Drive for Uber or Lyft
- Deliver groceries or food
- Take a second, part time job in retail or a restaurant
- Do odd jobs on an app like TaskRabbit
- Babysit or pet-sit
- Work as a freelancer in your skill set (writing, graphic design etc.)
There are tons of tips and tricks out there to help you save money for a home down payment quickly. You can save as much as $5,000 in 6 months!
The point is, it is a lot easier than you think, you just have to start! Today!
8. Ask for a Raise
Again, the more money you make, the faster you can save up for a house to buy.
Asking for a pay raise can not only help you save money faster, it can also increase the amount of home loan you can get approved for. And that affects how much house you can buy!
The more income you make, the more loan you will get approved for since mortgage lenders look at that.
Your income directly affects how much house you can get approved for and how much you can afford when it comes to monthly mortgage payments.
9. Rent Out Your Spare Room or Car
If you have an extra room in your current home or even a garage, consider renting it out for extra income.
You can make several hundred dollars a month for rent. And, if you rent it on AirBnb you can possibly make even more. You can event rent out storage space in your garage.
Did you know you can also make money renting out your car? Turo is a site that is almost like AirBnb for cars.
People will pay you to rent your car, just like at Hertz.
10. Ask for Money
Asking for help is never a bad thing. If you want to save money more quickly, consider asking family for assistance.
There is some paperwork you may have to fill out if you receive a larger gift amount that will be used for the down payment though. Your mortgage lender can help you understand those details.
But if you have a birthday coming up, tell everyone to hold the gifts and just give you some cold hard cash instead!
11. Defer REtirement Contributions
You could also free up more money by temporarily stopping any 401K or retirement savings contributions you are making.
You can instead reroute this money in to your down payment savings. Buying a house is still technically an investment, one that you should make equity and money from so it isn’t overly damaging to do this.
However, if you are getting a company match on retirement contributions, you may not want to do this as you would lose out on that extra, free money.
How to Save Money For a House While renting?
You need to start a down payment savings as soon as possible, even while you are renting.
If you want to know how to save money for a house while renting, just use any of the money saving tips above.
But here are a few extra tips for saving for a house while renting:
- Downsize and move to a cheaper apartment and smaller place
- Instead of renting a whole apartment, consider just renting a room in someone else’s home to dramatically reduce your monthly payment
- Take on extra roommates to reduce your rent costs
Why should you buy a house instead of renting?
Well as I mentioned, renting just means you are buying a house for someone else! In most cases, a mortgage may cost the same or even less than what you pay in rent.
So renting truly is a waste of money. Putting that money towards a mortgage each month means it will come back to you someday should you choose to sell.
Plus, as you build equity you are increasing your financial health. You could potentially take a cash loan on the equity of your house and use it to start a business.
Owning real estate is a win-win situation!
How Much Money should I save For a House Down Payment?
Well, that depends. If you want your monthly mortgage payment to be less, putting more money down on the house up-front will help with that.
The least amount you have to save to buy a house is 3.5% of the purchase price if you are a first-time home buyer.
If you have already purchased a home before, you will need at least 5% down. Most conventional loans require at least 5% down if it isn’t your first home purchase.
So on a house that is $300,000, you would need $15,000 for the down payment.
Keep in mind, when buying a home, you will also need closing costs, which can be as high as 3%.
But, there are ways around that. You can ask the seller to pay all or part of the closing costs so you don’t have to have as much cash to close on your house. Rolling closing costs into the negotiation is a fairly common practice.
The more you put down, the lower your monthly mortgage will be and the lower your interest rate which saves a lot of money over time!
If you decide you want to buy a rental property instead of a primary residence, you will need 20% down of the home’s purchase price.
I did this for my first home purchase and made enough money to buy my own home a year later! I highly recommend this home buying route as an alternative.
You can also adjust how much you save up for a house based on what you want your monthly mortgage payment to be. If you want to keep that payment lower, then putting more money down will help.
You can also put 20% down and avoid PMI insurance. If you do a down payment that is less than 20% of the home’s purchase price, you will have to pay private mortgage insurance.
The price of that will depend, but it could save you as much as $100 or more a month to avoid mortgage insurance.
And of course, when saving for a house don’t forget that you will need money for moving expenses as well.
In any case, there are options on how much you need to save down payment money to buy a house. Set a goal and stick to it!
Where should you save your money for a house?
I’ve really only got one suggestion on where you should keep your money while saving for a house. A high-yield savings account will give you interest on your money, so over time you are making a little bit of money. I like CIT Bank’s online savings account.
Once you have enough money saved for a down payment, what should you do?
The next step you should take is to talk to a mortgage specialist. You need to get approved for a loan in order to buy a house.
Getting a pre-approval to purchase a home is a relatively simple process. You just need to find a bank that gives mortgage loans and provide some key financial information to them.
They will tell you how much money you can spend on a house (with your saved down payment of course!) You can even do this step while you save for a home, that way you will understand exactly how expensive a home you can get.
Then, you need a real estate agent and you can start looking for your dream home.
And, make sure you know the all the steps to buying a home so you are prepared.
Start saving for a home today
Owning real estate is beneficial for your financial health.
If you start today, before you know it you can have enough money saved up to make a down payment on your own house. There’s no better investment choice you can make!
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Here are my favorite budgeting and saving apps:
Acorns which takes your spare change from purchases and invests it for you to help you make even more money.
Personal Capital for money management. Get a money dashboard, free analysis and personalized wealth advice.