Ways to save for a house

Buying a new home is one of the most significant moments of your life, both personally and financially. Often, it can be a long road saving for your down payment. Below we offer some tips for how to save for a house that might help you reach your goal of homeownership a little bit more quickly.

Set a realistic home budget

First, you'll have to consider your needs and wants for your new home. Both your needs, like number of bedrooms, amount of space and proximity to schools, and wants like a fireplace or a swimming pool will factor into your budget.

Then research home prices in your area that meet your criteria. When you have an idea of how much your ideal home in your ideal location would cost, you'll want to start calculating how much of a down payment you'll need and how much your monthly payments will be.

Working with a lender early on in the process can help you determine the home price you can afford and how much you'll need to save as well as additional closing costs and mortgage insurance you may need to account for. Your home budget should also factor into any costs for renovations, upkeep and utilities, which could impact the price range of homes you'll be looking at.

Next, evaluate at your monthly budget and calculate how long it will take you to save. For example, if you need a $50,000 down payment, and already have $15,000 saved, you'll still need $35,000. If you're currently putting away $1,500 a month, it will take you two more years to reach $50,000. Want to move into your new home faster? You may need to make concessions on your wants and needs to find a more affordable home. If you still need to make some adjustments, the following tips can help you get to your savings goal faster.

Pare down your current expenses

Saving for a house may seem like a large goal, but cutting back on existing expenses can make a big difference. Small steps like packing a lunch or skipping your morning latte may help you get started, but don't forget to look at other aspects of your lifestyle. For example, you may consider moving to a less expensive apartment in the meantime, using public transportation to save on gas, cutting back on home energy use or getting a roommate. No matter where you cut back, make sure you reallocate those savings toward your down payment goal.

Earn extra income

A side job may give you more money to put toward saving for a home. If your schedule allows, look for part-time work on nights and weekends, such as reselling, dog walking, babysitting, ride-sharing, food delivery or freelancing and devote those paychecks to your home savings account. Even if you can't work consistently, one-time gigs or money-making hobbies can help boost your progress toward your goal.

Don't skimp on retirement savings or emergency funds

When you're saving for a home, you may be tempted to use a portion of your emergency fund or retirement nest egg as part of your down payment. However, it's important to keep these accounts separate to stay financially stable in the years ahead.

Instead, consider which savings options will maximize your earnings and help you meet your goal in the time frame you've allotted, and open a new account (or accounts) designated for home buying. While it may mean you spend a bit more time saving to reach your goal, you'll be glad to have those other funds stowed away in the future.

Consider additional savings options and tools

If you're still looking for a little boost to your savings, account options with higher interest rates may help your funds grow a bit faster:

• Certificates of deposit (CDs) offer a fixed interest rate, often higher than traditional savings accounts, over a set period of time.
• High-yield savings accounts often require a higher minimum balance, but typically offer a higher interest rate than traditional savings accounts.
• Money market accounts earn slightly higher interest rates than traditional savings accounts, while also sharing some of the capabilities that checking accounts have.

Additional tools can also help you automate your savings, taking one less item off your to-do list:

• With direct deposit, you can often deposit a predetermined amount into your savings account in addition to your checking account.
• Automatic transfers will automatically move funds from your checking to your savings account. You can choose the amount and the frequency.
• Citizens Savings Tracker®¹ is a tool available to Citizens customers to help set and track savings goals.

Start saving for your new home

Learning how to save for a house can help you feel more confident and motivated to reach your goals. Take a look at Citizens' saving account options and choose a way to save that's right for you.