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How do you save money for a house?

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Quick Answer

Saving money for a house involves putting extra money away after expenses as a down payment or to be able to purchase the house outright. Typically, home buyers often set a monthly savings goal, leading to an overall goal of saving 20 percent down or more of a house purchase price.

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Full Answer

Home buyers typically have to restrict their existing monthly spending to achieve the savings goal in a reasonable time. Downsizing current living expenses can help boost savings, according to USA Today. Having the monthly savings automatically deposited into a specific account helps ensure savings occurs on a regular basis and also helps mimic what having a monthly mortgage payment may be like for buyers.

Paying off existing credit card and other high-interest debt allows for additional savings, explains USA Today. Financial adviser Dave Ramsey advises paying off all debt before considering buying a house as it allows the most financial flexibility to handle ongoing, typically large, mortgage payments. Selling a car that requires monthly payments and buying a car with cash can allow those monthly payments to go directly to the monthly savings. Increasing income is also an effective way to save more money for a house. Working overtime, picking up a second job or getting a raise are all ways that can be used to increase income and thereby savings.

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