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How to Save for a House

Buying a home is a significant financial milestone and a key part of the American Dream. As of May 2024, the median home price in the United States was $419,300, according to the National Association of Realtors (NAR). While you don’t need to have all that money upfront, your down payment and closing costs can add up quickly. Let’s explore how to save for a house, where to keep your savings, and how much money you need to set aside.

How Much Money Do You Need to Buy a House?

The amount you’ll need to save depends on various factors, including the location, type, and condition of the home. Here are the main expenses to consider:

Down Payment

The down payment is the portion of the sale price you pay upfront. While a 20% down payment is often recommended, it isn’t always necessary. Here are the minimum down payment requirements based on loan type:

• FHA Loans: 3.5% down payment for first-time homebuyers with a FICO® Score of 580 or higher.
• VA Loans: No down payment required for eligible U.S. service members, veterans, and surviving spouses.
• USDA Loans: 0% down payment for low- and middle-income homebuyers in certain rural areas.
• Conventional Loans: As low as 3%, depending on the borrower’s financial situation and the lender.

Closing Costs

Closing costs typically range from 3% to 5% of the purchase price and include fees paid to the mortgage lender, payments to external service providers, and prepaid funds for homeowners insurance and property taxes.

Moving Costs

Don’t forget about the logistics of moving. Hiring movers can cost between $878 and $2,547, and you might also encounter hidden costs like packing materials, moving insurance, and storage fees.

Where to Save Money for a House

Saving for a home usually takes time. Here are some types of accounts that can help you earn interest along the way:

• High-Yield Savings Accounts: These accounts offer higher yields than traditional savings accounts. As of June 2024, some APYs are as high as 5.55%.
• Certificates of Deposit (CDs): CDs require you to keep your money in the account for a predetermined period. Some CD rates are up to 5.35% as of June 2024.

Investment accounts and retirement accounts are generally not ideal for short-term savings due to market volatility and potential penalties.

8 Ways to Save for a House

• Revisit your budget and ensure you’re financially ready to buy a home.
• Set a monthly savings target and automate transfers to your home fund.
• Save work bonuses, tax refunds, and other cash windfalls.
• Pick up a side hustle or part-time job.
• Reduce expenses by canceling unused subscriptions and negotiating bills.
• Explore first-time homebuyer programs and grants.
• Negotiate a raise or one-time bonus.
• Consider taking on a roommate or renting a more affordable home.

The Bottom Line

Saving for a house requires planning and prioritization. By doing your research and making informed decisions, you can achieve your goal of homeownership. For expert mortgage services, contact O1ne Mortgage at 213-732-3074. We’re here to help you every step of the way.

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