How to Save for a Down Payment on a House

Concept of saving money to buy a house.

Saving up for a down payment on a house can seem like an impossible task, but there are ways to make it happen. By following a few simple tips, you can reach your savings goal in no time. Most of these options will end up taking about a year or more to save for a down payment, but that’s a small price to pay for the opportunity to buy a home.

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But let’s start by talking about how much you actually need to save up. For most people, a 20% down payment is the ideal amount. This gives you the best chance of being approved for a mortgage and avoid paying private mortgage insurance (PMI). It guarantees a large amount of equity in your home which you can leverage in the future if you ever needed to.

If you don’t have the full 20%, there are still many options available to you. You can put down as little as 3.5% with an FHA loan as many first time home buyers do. However, you will be required to pay mortgage insurance, and you will have much less equity in your home when you move in.

In addition to a down payment, you also need to have money saved up for other costs associated with buying a home, such as closing costs. These can add up to thousands of dollars, so it’s important to factor them into your savings plan. Expect to pay upwards of 2-3% in closing costs on top of your down payment.

Now that you know how much you need to save, let’s talk about some ways to make it happen. 

I’ll talk about 8 different tactics, but you can combine some together to make it happen even faster.

1. Automate your savings.

One of the best ways to save money is to have it taken out of your paycheck automatically and deposited into a savings account. This way, you won’t be tempted to spend the money on other things. You can also set up automatic transfers from your checking account to your savings account so that you’re always putting away money. It may not seem like much, but if you can save $150 from each paycheck, that is an extra $3,600 per year! Talk to your HR department, they can usually setup a second account to deposit into directly from your check. Your bank can also be setup on a schedule to transfer money on your pay day, so you don’t have to worry about it.

2. Make a budget.

In order to save money, you need to know where your money is going. Track your spending for a month so that you can see where you can cut back. Once you have a good idea of where your money is going, you can create a budget that will help you save. You may be surprised just how much you spend on things like food, clothing, and entertainment. Look at areas that are non-essential and try reducing those by 50%. Employ the automated transfers to a savings account in the amount that you cut from your budget so you aren’t tempted to spend it.

3. Cut back on expenses.

Going along with the previous strategy of diving deep into your budget, you can work on lowering expenses. This is where it is important to take a really hard look at what you are spending on essentials.

Let’s break this down into 3 areas – 1: Housing, 2:Transportation, 3:Recurring Bills


Consider where you are living.

Renting allows for flexibility, and finding another rental that’s just a few hundred dollars less a month could give you that extra savings you need. Consider a lease in different areas, or possible smaller, older, or with less amenities.

You can also consider taking on a roommate. Splitting costs with someone, even for a short time period can greatly impact your savings ability.


A high car payment can often be something that really makes it hard to save. There is a tradeoff between a reliable car that doesn’t require a lot of maintenance, and an older used car. If you car payment is high, you have a few options. If you’ve increased your credit since you purchased, you can look into refinancing your car. Lowering your payment by a hundred or more dollars can be thousands saved per year. Consider trading in your larger vehicle for a less expensive, compact, high mile per gallon car. Not only can this lower your monthly payments, but you should see a decrease in the cost for gas and car insurance.

Recurring Bills:

Some of the recurring bills that you can work on negotiating include your car insurance, renters insurance, cell phone bill, and cable/internet. These are all services that you can call and talk to customer service about lowering your bill, and there are likely competitors that you can also shop for costs. If you threaten to leave for a competitor, many times they will work with you to keep your business.

As far as recurring entertainment costs, really decide if you need multiple streaming services. Do you pay monthly for a gym membership that you no longer use? The best thing to do is pull your credit cards and bank statement for the last month, and look at any recurring charges. Choose some to just get rid of.

4. Increase your income

This may sound like a no-brainer, but making more money allows for you to save more. A few options could be a new, better paying job, or working towards a raise at your current job. That’s an entire process on its own, but if you haven’t had a pay increase in some time, or they’ve hired new people at a higher rate than you are currently getting paid, you may have an easy argument for an increase.

You can also look at a second job, whether part time or full time, it’s something you can do just to save up for your down payment. Working a part time job of 20 hours a week, at $12 an hour, is about $10,000 in extra income a year. Couple that with some cost savings and you could have your down payment saved in a year.

The key here is to not spend that extra income, work to put it away in savings and stay living within your same means.

5. Take advantage of company offered incentives like a 401k.

If your company matches your 401k contributions, it may be a way to accelerate your savings. Many companies will match upwards of 4% of your paycheck. This means that for every dollar you put in, they’ll also put one in. Often there is also a vesting period, meaning their matched amount isn’t yours for a specified period of time which can be as little as instant, and as long as several years. Since your 401k contributions are pre-tax, they often don’t impact your paycheck as much as simply moving money into a savings account. Combine that with company match, and the managed nature of the accounts, you’ll often see your account grow much more quickly than just a standard savings account.

This isn’t a quick plan, often people save for years in their 401k to get it to the point where there is enough balance to use it for a home down payment. Start early, even contributing just 1% will have a bigger impact than you might think.

Some companies also offer down payment assistance to their employees. If your company doesn’t, talk to your HR team or your boss about it. It may be an incentive they’re willing to consider to help keep more people with the company, and increase employee retention rates.

6. Consider a side hustle to make some extra money.

A quick note about this, you may not always be able to use this as part of your income calculations when applying for a loan. Consider this as a great way to get those extra savings you need, but there are a lot of extra restrictions around how contract or inconsistent work can be calculated as income with many loan programs.

Some of the more popular side gigs of these include:

Delivery or Driver – Uber or Lyft, which allows you to work at seemingly off house. Add an hour or two before or after work to earn a few hundred dollars every week. You can also consider doing Ubereats, doordash, grubhub, or instacart as a shopper or food delivery. Many of these jobs end up paying about $15 an hour, but depend highly on tips and consider your costs of doing business with the wear and tear on your vehicle and gas costs.

Freelance writing – There are many sites that allow you to get connected with companies who need writers. Some pay per word, while others pay a flat rate per article. Depending on how good and fast of a writer you are, some people make a six figure living just doing contract writing.

Social media consultant – Have graphic design skills, or just really know your way around social media. Many companies are paying people to handle their social media for them. Consider talking to local businesses which don’t have a good presence, and pitch them paying you monthly to take care of it.

Event planner – Everything from doing wedding coordination to a full fledged travel agent. Most work can be done on a phone or tablet, and requires attention to detail, but can be rewarding and make a good amount of money.

Dog walking/pet sitting – Long term pet sitting or regular dog walking can be a great extra source of income, especially for pet lovers. There are sites that will connect dog walkers with pet owners.

Car or home cleaning – Start a business offering to clean either peoples homes or cars. This can be done on your own schedule, and doesn’t require any special equipment other than maybe some cleaning supplies. Larger homes and car detailing can start adding thousand in income with just a single booking a week.

Baking or Cooking – Often you just need a basic permit from the city or county and business license, all of which are often under $100 to get started. If you are good at making holiday or unique treats, you can start selling them locally, online or at local fairs and farmer’s markets. Facebook neighborhood groups are great ways to get your name out there, and you may be surprised how much people enjoy your unique creations! Everything from cookies to muffins and cupcakes, to charcuterie boards, to jams and jellies can be made at home and sold for a profit.

7. Tax refunds straight to your savings

If you get a sizable tax refund, it’s very tempting to use that for things like vacations. The average refund in 2022 according to the IRS was over $3000. Taking the whole thing, or even just half can get you a jump start on your down payment. Any other type of stimulus or government payments may also make sense to drop directly into your savings account. Pretend like it didn’t even happen, and use that money towards your down payment.

8. The last option is a gift.

This may sound like something that you wouldn’t expect to be able to get but many churches or local organizations have gift opportunities. Consider family members who might be able to help you out a little. Even $500 can make the difference when you’ve been saving for a year or more to help put you over the top. Some cities or counties have grant programs that are not tied to a specific loan that helps first time homebuyers within certain income requirements. Often you have to be a resident of the city for several years, and there may be other limitations, but it’s worth checking your local city and county for any programs they might offer.

So let’s run the numbers to give you an idea of how this would all work. Let’s say you were able to save two years of tax refunds. That would give you $6,000 in savings without impacting your lifestyle. If you were able to cut $100 per month from your expenses, that would give you an extra $1,200 per year, which would put us at $7,200. If you could put away $150 per paycheck, that would add another $3,600 to your savings in a year, which would put you at $10,800 in savings in just a year. Add in a part time job to add another $10,000 in a year and you are now at $20,800 saved. That would be about as much money as you would need for a down payment and closing costs on a $350,000 home. All of this in just a single year. 

There are many creative ways to come up with the down payment for your first home. You just have to get a little bit creative and resourceful to find what will work best for you and your situation. It doesn’t hurt to ask others how they saved for their down payment to get other ideas as well. Just remember, the sooner you start saving, the sooner you’ll be able to call your house, your home.