How to Save for a House

Saving for a house is hard work. And while it can take more time than you want, you’ve got this. Like with any task that seems impossible at first, break it down into smaller steps. That’s how you eat an elephant—one bite at a time. We’ll walk you through how to set your savings goal, cut spending, and boost your income so you can get into that house!

How Do You Save Money for a House?

To save money for a house, you first need to be debt-free (Baby Step 2) and have a full emergency fund (Baby Step 3). That’s why we say saving for a house is Baby Step 3b.

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Getting rid of your debt first frees up your greatest wealth-building tool: your income. With no debt payments eating into your monthly cash flow, you can put serious money toward your home savings goal each month. Once you’ve set your down payment goal (we’ll cover that next), divide it by the number of months you want to save. For example, to save a $40,000 down payment over 24 months, you’ll need to put away about $1,700 a month. That’s totally doable when you’re debt-free and on a budget.

How Much Should You Save for a House?

Aim to save 20% of the home’s price for your down payment. That’ll let you skip PMI (which only protects the lender, not you). At least 5% down works if you’re a first-time home buyer—but then PMI will get added into your mortgage payment.

In a perfect world, you’d pay for your house with 100% cash. But that’s not realistic for everyone. The real answer depends on your income, how you spend money, how you budget, and how much house you’re looking for.

To make homeownership a blessing instead of a burden, use the 25% guideline: Keep your mortgage payment to no more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage—otherwise, you’ll be house poor. That 25% limit includes principal, interest, property taxes, home insurance, PMI and homeowners association (HOA) fees. To figure out what that amount is for your income, try our Home Affordability Calculator.

What Are the Down Payment Minimums by Loan Type?

Different loans let you buy with different down payments—but a low down payment almost always costs you more over time. Here’s how the main loan types stack up:

See the pattern? The loans with the smallest down payments come with the biggest long-term costs. Save up, put down more, and go conventional.

What Are the Steps to Save for a Down Payment?

There are five steps to save for a down payment: Set a clear goal, tighten your spending, pause retirement savings, boost your income, and cut the extras. It may sound intimidating to save for something as expensive as a house. But with a plan and some grit, you’ll be amazed at what you can accomplish! Let’s break down each step.

Step 1: Set a clear savings goal.

The first step in saving for a house is to know the exact dollar amount you need—and you get there by working backward from what you can afford.

Start with your monthly take-home pay and multiply by 25% to get your maximum monthly mortgage payment. Then use our Mortgage Calculator to test different home prices and down payment amounts until the monthly payment lands at or below that number.

For example, say your take-home pay is $6,500 a month. Your maximum monthly payment is $1,625. You try a $200,000 home with a $40,000 down payment—that’s a $160,000 loan. Our Mortgage Calculator estimates your monthly payment at just under $1,600 (assuming you get a 15-year fixed-rate conventional mortgage at 5.5% interest with a 0.65% property tax rate, a $1,000 annual home insurance policy, and a $100 monthly HOA fee). In this example, a $200,000 home is in range, and 20% of $200,000 gives you your savings goal: $40,000.

Then, break that total down by dividing $40,000 by 24 months. That works out to be a monthly savings target of nearly $1,700.

Now that you’ve set your goal, it’s time to fast-track your savings.

Step 2: Tighten your spending (temporarily).

Let’s start with the money you’re already bringing in every month. You’ll be amazed at how much money you find when you pay attention to your spending, so let’s flex those budgeting muscles! Here are some ideas to help you tighten your spending temporarily while you work on saving for a house. The estimated monthly savings are listed below:

• Take a break from the gym: $60
• Save going out to eat for special occasions: $200
• Trim your clothing budget: $100
• Buy generic: $160
• Cut the cable or cut back to one streaming service: $110

These five cuts free up about $630 a month—more than $15,000 in two years. Now, get creative and think up even more ways to trim your spending. The easiest way to keep an eye on your spending (and spot new ways to cut back) is with our free EveryDollar budgeting app.

Step 3: Hold off on your retirement savings (temporarily).

At Ramsey, we teach you to start investing 15% of your household income for retirement after you’re out of debt and have your full emergency fund in place. But if you’re planning to buy a house in the near future, it’s okay to hold off on your retirement savings for a few years and put that money toward your down payment.

If you’re currently investing $500 a month into 401(k)s and IRAs, you could boost your down payment savings by $12,000 in two years by putting that money toward your down payment savings instead!

If you’re already saving for retirement, this might feel really weird. But remember, it’s temporary. Once you’re sipping coffee in your new breakfast nook, you can get right back to putting 15% toward your retirement goal. Just make sure this is only a quick detour—don’t pause your retirement savings for Baby Step 3b for more than two years. If it takes longer than that to save up your down payment, start investing again while you continue to save.

Step 4: Boost your income.

There’s nothing like picking up a side gig or a second job to turbocharge your savings. When you’re thinking up ideas, start with the stuff you love doing already.

• Like driving? If you don’t mind carting strangers around or making deliveries, you could make some sweet cash on a flexible schedule through rideshare services like Lyft or Uber.
• Enjoy teaching? Search online for tutoring jobs or ways to teach English as a second language. If you have advanced degrees, you could earn even more.
• Love pets? Let your friends and coworkers know you’re available to watch Rover the next time they’re out of town. Get some puppy therapy and make money at the same time.

Now, you’re probably wondering: Is the extra work worth it? (That’s like asking us if Dave Ramsey hates credit cards.) Yes—it’s absolutely worth it!

Let’s say you start a side hustle and put in 10 hours a week making $15 an hour. That’s roughly $120 per week—after taxes! Keep that up and you could add more than $12,000 to your down payment savings in just 24 months.

Step 5: Cut the extras and save even more.

It’s time to get tough and find more money to throw at your goal. Ouch. It might hurt, but keep your mind on your why—home sweet home. Here are a few ideas to get you started:

• Skip the summer vacay. Throw that money in savings instead. You could probably pocket $2,000 from that alone.
• Sell some stuff. Take advantage of online sites like ThredUp or Poshmark to sell gently used clothes, then use Facebook Marketplace or eBay for everything else. Sell. It. All.
• Have a garage sale. A garage sale can bring in extra dough like nobody’s business. Scoring $500 from a Saturday-morning garage sale is a win in our book.
• Save all the money you earn from your annual raise or bonus. Planning to get a little Christmas bonus? What about a bonus for a job well done? No matter what the extra cash is for, don’t be tempted by lifestyle creep. You can tell the big-screen TV to wait and stash that money in your house savings instead. That could be an easy $1,500 bump.

If you do all of those, you could add $4,000 or more to your down payment fund!

What Does a Realistic Home-Savings Plan Look Like?

Here’s how the tactics above combine into a real two-year plan:

How to Save a $40,000 Down Payment in 2 Years

How Can You Save for a House While Renting?

Renters have a few extra options to speed up their savings for a house.

Get a roommate.

If you’re single and renting an apartment by yourself, this tip is for you. The national median rent for a two-bedroom apartment is only about $150 more than a one-bedroom.⁶

So instead of living alone, upgrade to a two-bedroom, get a roommate, and split the rent in half. Based on recent medians, you’d go from paying over $1,200 on your own to paying about $700 with a roommate—saving you around $500 a month or $6,000 a year!⁷

Move to a cheaper apartment.

If you’re renting in a popular (aka expensive) neighborhood, consider sacrificing some razzle-dazzle to live in an area with cheaper rent. Let’s say you trade your $2,800 monthly rent in a hot neighborhood for $1,800 monthly rent in a less popular area. That’ll save you $1,000 a month or $12,000 a year toward your down payment goal.

No matter where you land, don’t let your monthly rent exceed 25% of your take-home pay. If you’re paying more than that, you’re renting more than you can afford.

Negotiate your rent.

Ask your landlord about lowering your rent. If you’ve been a reliable tenant, your landlord might help you out rather than risk vacancy. Even $100 a month less is $1,200 a year toward your down payment.

Where Should You Keep Your Down Payment Savings?

Keep your down payment savings in a money market or high-yield savings account where it’s safe. You won’t make tons on interest, but you won’t lose money either. Since a down payment isn’t an investment, you want it to be easy to access—but not too easy. And be sure to store it separate from your spending and savings accounts.

Avoid brokerage accounts, stock investments and crypto. If the market drops right before your closing date, you could lose years of savings in weeks.

For more tips on how to save for a house, check out our Saving for a Down Payment Guide. It’ll help you map out a plan, give you even more practical tips, and keep you on track to reach your goal. That white picket fence doesn’t seem like such a faraway dream after all, does it?

Should You Pay Off Debt Before Saving for a House?

Yes, pay off debt first—always. Get this: On average, around 5% of Americans’ monthly income goes toward nonmortgage debt payments.⁸ That’s money wasted paying for stuff from the past instead of going toward your future home. Based on that stat, someone making $4,000 a month would spend $200 of it on debt payments—adding up to $2,400 a year. But if they paid off their debt before saving for a house, they could put that $2,400 a year toward a down payment. That’s a huge difference!

Debt is the biggest thing standing between you and a down payment—specifically credit card debt and student loans.⁹ The absolute best way to free up your income for savings is to pay off debt as fast as possible.

Then, go one step further and stash away 3–6 months of living expenses as a full emergency fund. Imagine coughing up the funds to cover an HVAC meltdown or roof leak on top of losing a job and still trying to pay your mortgage—no thanks! An emergency fund turns that crisis into an inconvenience you can handle.

Sure, it might feel like a bummer to hit pause on the excitement of saving for a home while you clean up debt and build up an emergency fund. But trust us, doing this will help you save for a house faster—and protect you from a lifetime of stress.

What House-Saving Shortcuts Should You Avoid?

Some options look like shortcuts to homeownership—but end up costing you more. Here are two to skip:

Rent-to-Own Homes

A rent-to-own home is a house you agree to rent for a few years before you buy it. It might sound tempting to lock in a house before you’ve saved up money for the down payment, but rent-to-own comes with extra costs that make it more expensive than traditional homeownership.

You’ll pay a nonrefundable fee called option money that gives you the option to purchase the house later. On top of that, your rent will likely be higher because some of it may go toward your future purchase as part of a built-in down payment.

You can start to see why this isn’t a great idea. Why fork over a whole bunch of extra money to lock yourself into a bad deal instead of just saving the money by yourself? What if you decide you don’t want to buy that particular house after the rental period is over? All the extra money you paid for the rent-to-own agreement—gone. Bad idea!

Low-Down-Payment Government Loans

Government-backed loans like FHA, VA and USDA loans were designed for buyers who have little to no money for a down payment. But they come with higher monthly payments, additional fees and mortgage insurance that can stick with you for the life of the loan. Don’t fall for them. Instead, save for a larger down payment and get a conventional 15-year fixed-rate mortgage.

What Other Costs Should You Save for When Buying a House?

A down payment isn’t the only cash you need before buying a house. Here are the other costs:

• Closing costs: The median total for closing costs on a home purchase in the past year was $7,306, according to Ramsey Solutions’ Real Estate Report 2025. But if you want a percentage, closing costs typically run about 3% of a home’s purchase price.¹⁰ When you close on a house—which is when you sign all the paperwork that officially makes your new home yours—you have to pay for expenses like loan origination fees, credit reports, underwriting fees, appraisal fees and title fees.
• Moving expenses: You can always save money on moving costs by asking friends for help. Otherwise, hiring movers can cost anywhere from $900–2,600—depending on how much stuff you’re moving and how far away you are from your new home. (If you’re moving really far away, you could pay up to $10,000.)¹¹ If you go that route, be sure to get quotes from local moving companies ahead of time to help with budgeting.

Keep in mind: The seller might actually cover some of your closing costs. But don’t bank on it. That usually only happens if the seller is in a hurry to move or if it’s an alternative to repairing something that comes up during the home inspection.

Who Can Help You Plan Your Mortgage?

For professional advice on how your home down payment will impact your mortgage, talk to a home loan specialist. A good mortgage provider will help you understand your options and show you how to get an affordable mortgage you can pay off fast. Check out our friends at Churchill Mortgage. They’ve earned the right to be called RamseyTrusted^® because they share our high standards for excellent service.

How Do You Take the Next Step Toward Buying a House?

When you’ve worked so hard to save up a big down payment, the last thing you want to do is make a bad financial investment. That’s why working with an experienced real estate agent who has your best interests at heart is key.

To find a real estate agent who fits that bill, try our RamseyTrusted program. We only recommend the best in the business, and we’ll match you up for free. Don’t take a chance on your aunt’s neighbor’s cousin who just got his license.

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