7 Ways to Save Money for a House

Houses are expensive and saving money to buy a house can take years. In fact, the median sales price for a new home was $346,400 in January 2021, according to the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau, and the median sales price was of US$408,800. For first-time homebuyers, committing to a purchase price in this range can be daunting. However, mortgage rates are low, so it’s possible to buy a property and have monthly payments equal to or less than what you’re paying in rent.

If you’ve set a savings goal — including down payment and closing costs — and are getting ready to buy, use an online mortgage calculator to help calculate your monthly payments and understand how much more you’ll need to save before making a move. .

Follow this guide to discover seven ways to save money on buying a house:

1. Save extra money (like stimulus checks, tax returns, or year-end bonuses)
2. Take advantage of low to zero mortgages
3. Consider a Balance Transfer Credit Card
4. Make use of your retirement plan
5. Automate your high-yield savings account
6. Find a roommate
7. Reduce non-essentials

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1. Save extra money (like stimulus checks, tax returns, or year-end bonuses)

The third round of stimulus checks, totaling up to $1,400 for individuals, has been distributed to millions of Americans as part of President Biden’s $1.9 trillion coronavirus relief plan.

Your stimulus check, any overpayment on your 2020 tax return, or an unexpected year-end bonus from your employer are excellent options to start saving for a down payment on your new home purchase.

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2. Take advantage of low-to-zero mortgages

Saving money for the standard 20% down payment can be an uphill battle. Many first-time homebuyers opt for an FHA loan because it only requires a small down payment and has less stringent credit requirements.

Jason Gelios, Realtor at Community Choice Realty and creator of The AskJasonGelios Real Estate Show, says, “Even with limited savings, first-time homebuyers can also take advantage of low-to-zero mortgages and use cash to cover upfront costs. , such as home evaluation and inspection.

While it’s generally true that the best mortgage rates and terms are reserved for applicants who have a good credit score and history and can make a 20% down payment, taking advantage of low or zero mortgages can help you make a Buying a house without a large outlay. of money in advance.

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3. Consider a balance transfer credit card

If you have large balances on high-interest credit cards, consider transferring them to a balance transfer credit card. These cards typically offer lower interest rates during a promotional period. You may also get better terms than with your current credit cards, and you can consolidate your credit card debt to simplify your monthly payments.

Be aware that you may have to pay a balance transfer fee from the start and may end up with a higher interest rate after the promotional period ends. Your credit score may be affected due to the credit card approval process.

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4. Make use of your retirement plan

Orlando Miner, CCIM and CEO of Miner Capital Funding, recommends using your 401(k) retirement as part of your overall plan. “Retirement plans are a great way to get money for your mortgage, and many plans have a mortgage-only penalty-free option.”

But remember, you can only borrow up to $50,000 or half of the vested balance (whichever is less) in your 401(k) account. You will be required to repay the loan with interest, and some 410(k)s require repayment within five years.

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5. Automate your high-yield savings account

A high-yield savings account typically pays higher interest than a traditional savings account. You can reach your savings goal by opening a high-yield savings account and making sure some of your paycheck automatically goes into that account so you’re not tempted to spend it elsewhere. You might even consider opening (and automating) a separate savings account just for the purpose of saving money for your new home.

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6. Find a roommate

If you pay the rent alone, you might consider hiring a roommate. This way, you can split your monthly payment, utilities, and other recurring expenses in half and put the money you save into an interest-bearing account. Save $1,000 a month, and at the end of a year, you’ll have $12,000 in the bank, plus earned interest.

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7. Reduce non-essentials

One of the best ways to save for a mortgage is to consider cutting back on everyday expenses like gym memberships, magazine subscriptions, streaming services, or dining out.

Justin Dwyer, co-founder of Cambio, a “second chance” digital banking app, says: “If you stop at a drive-thru lunch every day, take a different route so you don’t see that store. You’re less likely to feel desire if you don’t see what you want most.

Since buying a home is expensive, figuring out where you want to live, what type of home you want to buy, and in what price range can better determine what down payment you can afford and what your future mortgage payments will be. .

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