How to Save for a House: A Step-by-Step Plan

For most people, the down payment is the biggest barrier to homeownership. On a $350,000 home, a 20% down payment is $70,000 — plus closing costs. That's a serious savings goal. Here's how to get there faster than you think.

How Much Do You Actually Need?

• 3% down (FHA/conventional minimum): $10,500 on a $350k home — plus 3-5% closing costs
• 5% down (conventional): $17,500 — avoids some loan restrictions
• 10% down: $35,000 — smaller PMI payments, better rate
• 20% down: $70,000 — no PMI, best rates, strongest offer
• Rule of thumb: budget an extra 3-5% for closing costs on top of your down payment

Step 1: Set a Specific Target and Timeline

Pick a home price range based on what you can afford (monthly payment under 28% of gross income). Decide your down payment percentage. Set a target date. Now you have a monthly savings number. Example: $40,000 goal in 3 years = $1,111/month.

Step 2: Open a Dedicated High-Yield Savings Account

Keep your down payment savings completely separate from your regular savings. Use a high-yield savings account (HYSA) earning 4-5% APY — not a regular savings account earning 0.01%. On $30,000, that's the difference between $3 and $1,500 per year in interest.

Step 3: Automate the Savings

Set up an automatic transfer to your HYSA on every payday. Treat it like a bill — non-negotiable. If your target is $1,000/month, that transfer happens before you see the money in your checking account.

Step 4: Accelerate With These Tactics

• Direct all windfalls (tax refunds, bonuses, gifts) straight to the account
• Temporarily cut discretionary spending — eating out, subscriptions, travel
• Take on a side income for 12-18 months specifically for the down payment
• Sell items you don't use — furniture, electronics, clothing
• Consider house hacking: buy a duplex, live in one unit, rent the other

Don't Forget These Costs Beyond the Down Payment

• Closing costs: 2-5% of loan amount ($7,000–$17,500 on a $350k home)
• Home inspection: $300-500
• Moving costs: $1,000-5,000
• Immediate repairs and furniture: budget $5,000-10,000
• 3-month mortgage payment reserve (some lenders require this)