10 Ways to Save for a Down Payment on a House

As many of you know, we’re currently working to save for a down payment on a house! We started a debt-free journey last year, finished our fully-funded emergency fund, and now we’re taking a pause before moving onto another financial goal to save for a down payment. It’s always been my dream to be a homeowner, but after a few other financial hurdles in life (student loans, learning mistakes with credit cards, etc.) I wanted to make sure I did everything I could right before I made the biggest purchase of my life! Today I’m teaming up with MSHDA to chat about 10 ways to save for a down payment on a house — including things I’ve learned along the way in our journey!

This post is sponsored by MSHDA. All opinions are my own.

1. Create a budget. This is something I do every single month. I create a monthly budget where I plan for every single dollar. You write or spreadsheet your expected income for the month, all of your bills/expenses, and whatever’s left at the end of the month goes toward your goals! So if that’s saving up for a down payment on a house, that’s your goal amount. The key to budgeting is to be realistic (give yourself a little spending money!) but also put in some sacrifice. Maybe you can give up your daily coffee or your monthly manicure to put those extra funds into your savings account. I try to rake through our budget every month, see what I can cut, try to lower any expenses, and throw whatever I can at the end of the month into our house down payment savings account.

2. Create a separate savings account. One thing that has really helped us…was to create a separate savings account for our down payment savings. I just signed up for an accelerated savings account where you earn a higher interest rate. No ATM card. No easy access! It takes about 3-5 days to transfer money out of it, so I am never tempted to use it for those late-night shopping splurges or a night out on the town. It’s fun to have it separate, to watch it grow and to reduce the temptation to spend it. I know once I put money into that account, it’s STAYING there!

3. Look into programs to help with down payment assistance. You don’t have to go through this process alone! Look into programs that help with down payment assistance. If you’re a first-time homebuyer, check out MSHDA’s Michigan Down Payment. The program provides down payment assistance up to $7,500 for first-time homebuyers. Learn how MSHDA can help you get over the hurdle of saving for a down payment here. Eligibility requirements apply.

4. Sell anything you don’t need anymore. One thing we did while getting out of debt was… sell everything! Well, everything we didn’t need or want anymore. You’d be surprised at how many things you have in your basement, extra bedrooms, or garage that you really don’t use. We ended up selling old music equipment Eric never played, my old scooter I never drove, tons of old dusty furniture from my early twenties, appliances I never cooked with. We sold the bigger things on sites like Facebook Marketplace or Craigslist, but everything else — we held a yard sale during our neighborhood’s community yard sale day!

5. Set realistic goals. Maybe this means shifting your goal from 20% to 10% or lower. So our goal/dream is to save that 20%, which is obviously the “ideal” or “gold standard”. But some days that seems impossible! Especially with soaring house prices, that 20% could easily be upwards of $50K or more. I know the goal of 20% is to avoid private mortgage insurance (PMI), but MSHDA can help with that too. They help make loans more affordable by offering conventional loans with discounted PMI. A borrower with a conventional loan only has to pay PMI up to the point their equity in the home reaches 20%. Then it goes away. A government loan like an FHA loan carries mortgage insurance for the life of the loan. So maybe consider a lower amount, look for assistance with PMI, and set more realistic goals. (As long as you’re not buying a house outside of your means, of course!)

6. Use cash, not credit. I know how handy credit cards and credit can be — you score miles, deals, points, 0% promos, etc. But it’s also VERY easy to overspend when you have (what seems to be) an unlimited spending amount and you’re not handing over actual cash. There’s something that tugs at your heartstrings when you see your bank account amount lower vs. charging something to your credit card. We recently had to purchase a new vehicle, and instead of financing, we paid cash! It was super exciting, but I was also overly cautious, looked for the best deal, negotiated it down, only bought within our means and what we could actually afford, and I’m not sure I would have done all of that if we had just financed the situation!

7. Sign up for automatic withdrawal into savings. An easy little thing is just to… sign up for automatic withdrawal! So when you create your monthly budget, you know how much you can afford to throw into your down payment fund. Just assign that to your bank, have them automatically take that amount out on payday, so you won’t even be tempted to spend it first before transferring to your savings!

8. Press pause on retirement savings. So I know this is a touchy subject for most, but hear me out. When you focus on something, that tends to make a change. If you’re focusing on multiple things, it just takes a lot longer to get the needle moving. When we were getting out of debt, we took a temporary pause on our retirement savings to really focus on getting out of debt. Redirecting those funds toward your down payment can be a great idea if you do it for a short period of time (think two years or less). This isn’t a long-term idea… just a way for you to be able to boost that account a bit. But make sure you’re not taking huge vacations or going on huge spending sprees in this process. That’s not why you’d pause your retirement. It’s to intensely focus on a goal for a short amount of time. (Side note, never borrow from or cash out your retirement accounts in order to come up with your down payment.)

9. Try out a side hustle. Nowadays, there are SO many ways to earn a little extra cash on the side! Thankfully my blog provides a nice side hustle for me, but I know it’s hard to break into the blogging/influencer realm these days. Thankfully you don’t have to do that. Pretty much all of my girlfriends now do Shipt on the side — where you deliver groceries! There are also services like Wag (walking dogs), UberEats or Uber (delivering food/providing transportation to people). You could also babysit, tutor, create things to sell on Etsy. Think of your strengths and what you’re good at (and hopefully what you enjoy doing) and see if there’s any way to make a small profit at it!

10. Create lists. This can include meal planning (think cheap!) and grocery lists (only buy what you NEED). If you’re trying out a new recipe and it calls for a spice you’ve never used/heard of before, it’s likely you don’t need to use that spice. Substitute it with something else! I cook a lot of meals at home, and I tend to cook similar recipes where I don’t need to splurge on fancy ingredients, or unique items that might go to waste. When I’m at the grocery store too, I don’t venture off the beaten path (which can be easy to do). I organize my list by my exact path at the grocery store, only buy what’s on the list, and it makes the checkout line much more pleasant when I know I’ve only gotten what I need AND within budget!

I hope these 10 tips help you with kickstarting your down payment on a house! Remember, if you’re a first-time homebuyer, check out MSHDA’s Michigan Down Payment. The program provides down payment assistance up to $7,500 for eligible first-time homebuyers. MSHDA also offers numerous housing education resources too! These education classes and one-on-one pre-purchase counseling services have been shown to benefit those who later became homeowners and improved the financial creditworthiness of those who did not! Learning + planning are key to making the best decision for becoming a homeowner. Let me know if you have any questions in the comments!