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3 Simple Steps to Pay Cash for Your Home

If you’ve been following Dave for long, you know his favorite way to buy a home is the 100%-down plan—paying cash up front, no mortgage needed.

For many who are still working to get out of debt or save up your emergency fund, paying cash for a home can seem like an impossible dream. But real people just like you do it every day, and you can too!

Here’s how.

Step 1: Free Up Your Income

There’s no getting around it: Saving for a home is hard work. You’ll need all the cash you can spare to get ‘er done! Your income is your most powerful wealth-building tool, so set it free by putting debt to rest.

Once you’ve kicked debt to the curb, pile up three to six months of expenses in the bank as quickly as you can. You don’t want an unexpected repair to throw you off your home-saving course. Plus, being debt free with a fully stocked emergency fund is a great way to ensure your new home is a blessing instead of a curse!

Step 2: Set Your Target

You can’t stay motivated if there’s no light at the end of the tunnel. That’s why it’s important to determine how much you can save by when.

Let’s say you want to save up $100,000 for a home. Divide $100,000 by the amount you can save each month to determine how long it will take to get there. 

$100,000 ÷ $1,000/month = 8 years, 4 months 
$100,000 ÷ $1,500/month = 5 years, 7 months 
$100,000 ÷ $2,000/month = 4 years, 2 months 
$100,000 ÷ $2,500/month = 3 years, 4 months 
$100,000 ÷ $3,000/month = 2 years, 10 months 

Look at your budget and see just how much you can squeeze out to put toward your goal. An experienced real estate agent can show you what kind of homes you can expect to buy with your money. Once you land on a dollar amount and a completion date, write it down and pin it up as a reminder that there is an end in sight.

With the right agent by your side, taking on the housing market can be easy.

Buy or sell your home with an agent the Ramsey team trusts.

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Step 3: Choose Your Home-Buying Adventure

Now that you know where you’re headed, it’s time to decide how you’re going to get there. We asked Dave’s Facebook fans to share their secrets to success. Here’s what they had to say.

Start small
Matt W. from Chattanooga, TN, bought his first home—a 1939 two-bedroom foreclosure—with a $19,000 cashier’s check. It wasn’t in the best part of town and needed a lot of TLC, but Matt and his new bride poured a lot of sweat into renovating it. Their hard work and patience paid off. Last year, they sold their honeymoon cottage for $64,000!

Size down
Casey P. from Greenville, SC, was living large with her husband in a big home but felt overwhelmed by the hefty mortgage and maintenance costs that came along with it. Determined to change their lifestyle, they sold their home and used the proceeds to pay cash for a condo. Casey says a smaller place has given them “a newfound freedom” with “less stress and more time to focus on family.”

See how much house you can afford with our free mortgage calculator!

Work your way up
If you can’t put 100% down the first time around, there’s still hope. Just ask Jeanmarie K. from Charles Town, WV. After four homes—and four mortgages—she and her husband finally paid cash for their retirement home. While she admits they had some luck in the housing market, the real difference came from buying up slowly along the way, purchasing less than the bank was willing to loan them, and never borrowing against their home.

The snowball method can work for you too! Let’s say you buy your first home for $120,000 and pay the mortgage off in six years. If you saved $20,000 a year for four more years, you’d have $80,000 in the bank, plus $120,000 in equity—enough to pay cash for a $200,000 home. And that assumes your first home never went up in value over the course of 10 years!

Put luxury on pause
Sacrifice was an underlying theme in many responses, and it came in all sorts of shapes and sizes.

—Brittany and Mark I. of Plainwell, MI, worked multiple jobs and lived on one income while they saved. After just a year and a half of saving, they paid cash for a $110,000 home!

—A year ago, Courtney G. of High Point, NC, fed her family of six on a budget of $40 every two weeks. Now, they live in a four-bedroom home they purchased for $11,000 and are fixing it up as they go.

—Jen W. of Bradford, ME, and her husband lived like no one else in a tiny one-bedroom apartment above her parents’ kitchen for five years while building their dream home mortgage free. That’s enabled them to live and give like no one else today. “We were able to adopt six children from Ethiopia, something we could not have done with $10,000 a year in mortgage payments!” Jen says.

Of course, you won’t have to live on beans and rice forever. Remember, short-term pain brings long-term gain.

Buy Your Dream Home for Less

Paying cash for a home takes a lot of hard work, but it’s worth the effort. Just imagine how awesome life will be when you have no bills and a paid-for home. You’ll be weird and loving it!

If you can’t pay cash for your next home, that’s okay! You’ll get there in time. And who says you can’t put 50% down on a 15-year, fixed-rate mortgage? You’d still be doing way better than most folks today!

Wherever you are in your home-buying journey, work with an experienced real estate agent to get the best deal on the home that’s right for you. A true pro works for your best interests at the negotiation table, no matter how big—or small—your budget may be.

Looking for an agent you can trust? We can connect you with a pro Dave recommends in your area.

Frequently Asked Questions

The first step to budgeting for a house is to know how much down payment you need. Ideally, you’ll want to save a down payment of at least 20%. For first-time home buyers, a smaller down payment like 5–10% is okay too—but then you’ll have to pay PMI. Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost). And stay away from expensive loans like FHA, VA and USDA.

After you’ve set your savings goal, here are some tips on how to save for a house: Pay off all your debt, tighten your spending, hold off on your retirement savings (temporarily), start a side job, and sell stuff you don’t need.

Let’s say you want to buy a $200,000 house. Your down payment savings goal is $40,000 (or 20% of the home price). To budget for this house in two years, you’d need to set aside close to $1,700 each month ($40,000 / 24 months = $1,670).

You can stash your down payment in a simple money market account or high-yield savings account. You won’t make tons on interest, but you won’t lose money either. But guys, don’t forget that saving a down payment is not the same as investing for retirement—you want to keep your savings liquid and in a place that’s easy to access.

As soon as you’re debt-free with a full emergency fund of 3–6 months of your typical expenses, you’re ready to start saving for a house!

If you want to save for a house fast, you need to be debt-free and have an emergency fund of 3–6 months of expenses saved. With your income freed up from debt payments and an emergency fund to protect you from life’s unexpected surprises, you can save for a house much faster. Here are some other ideas to help you save money fast.

Trying to buy a house when home prices are high can be really frustrating. But with the right plan, you can do it. Set a down payment goal and save like crazy for a year or two. Try these smart ways to save for a home down payment.

Once you have a strong down payment saved up, work with an experienced real estate agent who knows your area. The best agents will work hard to find you a house that fits your budget.

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Ramsey Solutions

About the author

Ramsey

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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