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How to save for a house

Plan ahead and stash away extra cash — even when money’s tight.

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Getting ready to trade in your monthly rent payments for homeownership is an exciting step. But with it comes the need to take a long, hard look at your finances. Follow these five tips on how to save for a house.

1. Map out your finances

To get a comprehensive overview of where you stand financially, create a budget by listing out your income, expenses, debts and other assets and liabilities. This can help determine how much you can afford to spend, where you can buy and ultimately how much to save for a down payment.

If you know you’ll be buying a house in the near future, try to cut back on unnecessary expenses. Or — if you have the time — consider starting a side business that could generate a bit of extra income for your savings.

2. Set a goal and plan ahead

Determine how much you want to save for a down payment and how long you have to save. Coming up with monthly deposit goals that work for your financial situation will help you stay focused and make progress. For example, if you can save $500 a month according to your budget, and you’re saving up for a $24,000 down payment, then you know it’ll take four years to save up enough funds.

3. Make regular contributions to your savings

Once you’ve set your down payment savings goal, store the funds in a high-yield savings account with a competitive APY, low fees and a minimum deposit you can comfortably meet. If you’re buying a house with a partner, opening a joint savings account can help you save and earn interest together. If your current savings account doesn’t have a high APY, consider comparing your options to find one that will help you earn more.

Take advantage of autosave, roundups or any other features that let you automate your monthly contributions — that way they’re out of sight, out of mind. Treating these contributions like a mandatory monthly expense will help make saving a habit.

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CIT Bank Savings Builder High Yield Savings Account
0.75% APY

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APY 0.75%
Fee $0
Minimum deposit to open $100
New account fee
Minimum balance to earn interest $25,000
Interest compounding Daily

4. Research

Look into cities or neighborhoods you’d consider living in, different property types and average housing prices to get an idea of what the market looks like. Then, read up on mortgage loan options you might qualify for.

5. Lower your debt-to-income ratio

Eliminating debt has two benefits. First, less debt means more money you can put toward your savings. But more importantly, paying off debt lowers your debt-to-income ratio, which increases your chances of mortgage approval. As you pay off debts and cancel bills, consider rerouting those payments into your dedicated savings account.

How much should I save for a down payment on a house?

Home buyers usually pay between 3% and 20% of the total cost of the home for a down payment. According to data from the US census, the median house price as of November 2019 was $330,800. Using this data, see how much the down payment varies:

Average purchase pricePercent downDown payment amount
$330,8005%$16,540
$330,80010%$33,080
$330,80020%$66,160

Other house costs to consider

Beyond the down payment and actual cost of the home, there are a handful of other mortgage costs that can come with buying a house. What you pay depends on factors like how far you move, the size of your house and the type of loan you apply for. Here’s an example of what you can expect:

  • Closing costs: Be prepared to encounter closing costs when purchasing a home ⁠— typically 2% to 5% of the purchase price of the property.
  • Homeowners insurance: You may be required to purchase homeowner’s insurance, which can cost between $300 to $3,000 yearly based on property type and coverage amount.
  • Private mortgage insurance: Without a 20% down payment, the bank requires you to pay a PMI that costs between 0.3% to 1.2% of your loan amount each year.

Closing costs include the following:

  • Credit report fee. As part of the loan underwriting process, most lenders charge between $30 to $40 to obtain your credit report.
  • Appraisal fee. A professional home appraisal helps your lender assess the property’s market value and typically costs $300 to $500.
  • Survey fee. Expect to pay around $350 for a survey of the property to assess boundaries and property lines.
  • Property inspection fee. You’ll likely pay between $200 to $400 for an assessment of property conditions.
  • Title insurance fee. This $1,000 to $5,000 fee is paid at closing and covers the lender and homeowner in the event of ownership record errors.
  • Origination fee. This administrative fee of 0.5% to 1% of your loan amount is charged by your lender to process your loan application.

Types of accounts to save for a house

Consider opening a low-risk account to help save for a house.

Savings accounts

A savings account generally pays between 0.01% and 1.75% APY and has low balance requirements and low monthly fees. Traditional savings accounts may give you more ways to access your money, but online savings accounts reward you with the highest APYs. Some even come with features like autosave or budgeting tools.

Money market accounts

A money market account is similar to a savings account, but it gives you more access to your money with checks and debit cards. They’re best for those that have a solid savings because they usually have high balance requirements. These accounts typically pay between 0.08% and 2.35% APY and generally have similar fees as savings accounts.

Certificates of deposit

Once you have a chunk of money saved, consider a CD to lock away your money for a fixed term — all while earning interest. Depending on your deposit amount and the term length, your deposit could earn as high as 5% APY. However, you usually can’t add money to your CD during the term, and you’ll pay a penalty to withdraw before the maturity date.

How to compare accounts for a house

Consider these factors before opening an account:

  • Fees. Look out for monthly fees that could eat into your balance and find out if the accounts offer ways to waive fees.
    Interest rates. A higher interest rate can help you save more. Try to find the best rate possible.
  • Access. Consider how often you’ll need to access your money. Each option has different considerations, so do your research.
  • Features. If possible, try to find features like autosave or roundups that could help you save more.
  • Bonuses. Bonuses and rewards programs are a solid way to get a head start.
  • Eligibility. Watch out for eligibility requirements, fee waiver conditions and other details to avoid a rejected application or extra fees.

Compare accounts that will help you save for a house

Use the table to compare savings accounts that can help you save for a down payment on a house. Sort the list by APYs, fees and opening deposits. If more than one account catches your eye, compare them side-by-side by clicking the “Compare” box next to each.

$
$
months
Name Product Interest rates (APY) Fee Minimum deposit to open Interest earned More info
CIT Bank Money Market
0.85%
$0
$100
Go to site
View details
A savings account with a higher-than-average rate and minimal fees.
American Express® Personal Savings High Yield Savings
1.00%
$0
$0
Go to site
View details
Enjoy no monthly fees and a competitive APY with this online-only savings account. Accounts offered by American Express National Bank, Member FDIC.
Chase Savings
0.01%
$5 per month
(can be waived)
$0
Go to site
View details
A simple savings account with low, waivable monthly fees and a $150 signup bonus when you meet deposit and balance requirements.
Citibank® Account Package
Citibank® Account Package

0.13% on $500,000+
0.08% on $25,000 to $99,999.99
0.04% on $0 to $24,999.99
$25 per month
(can be waived)
$0
Go to site
View details
Earn a $400 bonus after opening new eligible checking and savings accounts and completing required activities.
Aspiration Spend & Save Account

1.00% on $0 to $10,000 but you’ll need to be enrolled in Aspiration Plus and make at least $1,000 in debit card purchases a month
$0
$10
Go to site
View details
A spend and save combo account with no monthly service fees, free access to every ATM in the world, unlimited cash back rewards and deposits insured by the FDIC. The Aspiration Spend & Save Account is a cash management account offering of Aspiration Financial, LLC, an SEC-registered broker-dealer. Aspiration is not a chartered bank.
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Bottom line

Saving for a home is exciting, but takes planning, research and commitment. Finding the right account and sticking to a plan can help you stay on track. To find the best account for you to grow your money, compare top-rated savings accounts.

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