The Most Effective Way to Save for a Home

Use specific numbers to create a home down payment savings plan.

Use specific numbers to create a home down payment savings plan.

Owning your own home can be a dream or a daydream, depending on how you plan for it. Saving money without knowing exact amounts you’ll need and a timeline for reaching your goal can end up in frustration when you meet with a lender and find out that pile of cash you’ve saved isn’t even close to what you’ll need. Following a few simple guidelines and savings techniques makes an effective plan for saving for a home.

Meet With a Lender

The first step in saving for a home is to meet with a mortgage lender to determine how much money you’ll need for your down payment and closing costs. Depending on the type of loan you get, your out-of-pocket costs to buy a home might include an inspection fee, earnest money, down payment and closing costs. Your down payment, which is a percentage of the loan amount, depends on the price of your house. Working with a lender, you can determine what your monthly mortgage would be for a particular house and learn how much house you can afford based on your current income.

Analyze Your Financial Situation

Saving for a home revolves around your monthly income and expenses. Create a budget that lists your monthly income, expenses and savings goals, such as retirement, college fund and debt reduction. Calculate how much money you’ll be able to save monthly and annually toward your home.

Decide Where to Put Your Money

If you will be saving over the course of years, decide where you want to park your money during that time. You can try to grow your money by investing in the stock market or protect it in a lower-interest savings account or CD.

Monitor Your Progress

During the course of your savings timetable, interest rates might rise or fall, home values could do the same, and your income or expense situation might change. Re-assess your plan each year to determine if you’ll need more or less money to close the deal and how this will affect your savings goals and timetable.

Examine Spending, Debt and Taxes

After you have lived on your budget for several months, determine if there are any areas where you can cut your spending. Cutting $50 here and there each month to increase your savings $500 per month can net you close to $20,000 in extra home savings and interest in three years. Paying down $5,000 in credit card debt at 25 percent interest saves you another $1,250 each year. Take advantage of tax benefits such as a Flexible Spending Account. By putting part of your paycheck toward your health care costs in advance, you’ll reduce your taxes each year. If your employer provides a 401(k) match, you can you reduce your retirement contributions by that amount and put that money toward your home savings.


About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.

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