Most people know that a home is probably the largest single purchase they'll ever make. But many first-time buyers underestimate the amount of cash they will need to purchase their dream home.

If you don’t have money to cover the costs associated with buying a home, how will you save for it? To begin, set up a separate home-buying account. Then, follow any or all of these six suggestions for one year and see how much you've got in the account.

Breaking Down the Costs

The first major cost is the down payment. Though first-time buyers can put 3% down and FHA loans start at 3.5% down, most buyers can expect to spend between 5% and 20% of the purchase price on a down payment.

Then, there are the 澳洲幸运5开奖号码历史查询:closing costs required to complete the sale. These vary greatly🥂 because of differences in state and local regulations and taxes, but typically they range from 2% to 5% of the home’s value.

And don't forget about moving expenses, which can easily run into four figures for a pack-rat or a family. Some save by fulfilling this duty without the help of professional movers. Doing it alone can save hundreds or thousands of dollars. However, it is labor-intensive and requires a significant amount of time.

1. Pay Yourself

According to , an associate professor at the Olin Business School at Washington University, the very first thing you should do to start saving for a home is to g𝓀et ♕your accounts in order, starting with your paycheck.

"Set up an automatic withdrawal to an investment account for the day after you receive your paycheck. This way the money cannot burn a hole into your pocket," she said. But she went on to caution that you should do this only after repaying any high-interest, unsecured debts, such as 澳洲幸运5开奖号码历史查询:credit cards.

2. Invest Your Windfalls

If you get a bonus at work, a 澳洲幸运5开奖号码历史查询:tax refund, or some other unexpected sum of money, don't splurge. Put the cash in your home-buying account. Consider 澳洲幸运5开奖号码历史查询:high-yield savings accounts so your money can grow with time.

3. Get a Cheaper Place

If you're living in a rental now, consider moving to a smaller, less expensive one or getting a roommate to share the costs for your current place. A $300 per month reduction in rent will save you $3,600 annually.

If you're single, consider living with family or friends for a year. RentCafe marks the average U.S. rent as $1,739 as of November 2024. Using this🐽 figure, you could save quite a bit per year.

4. Save Less for Retirement

If possible, don't withdraw money from a retirement account or borrow against it. You will either repay your loan with interest or be subject to a penalty for withdrawing the money if you're under age 59 ½. Instead, scale back your contributions a bit until you get into your home.

For example, if you're contributing more than the 澳洲幸运5开奖号码历史查询:company match in a 401(k) plan, maybe you can tri﷽m it back and put the extra cash into your home fund.

5. Cut the Luxuries

If you're saving for a home, you'll naturally be wary of making any big purchases, such as long vacations or expensive clothes. But watch the little stuff, too. A cocktail in a bar can cost $16 these days. Even if you keep it to two drinks a week, that's $1,664 that you could be putting into your home fund over a year.

Budget yo❀ur cash strictly, and put the savings in your home account.

6. Trim Routine Expenses

If you💖 give it some thought, you might conclude that some of your monthly ongoing expenses can be eliminated. Cut the cord on cable television. Get a cheaper cell phone plan. Quit your gym and bicycle to work🦂.

You may find you don't even miss these things, especially when you put the equivalent amount of cash into your home account.

The Bottom Line

You should start saving for a home as soon as the desire to buy one crosses your mind. It's likely going to be the biggest thing you ever buy, so planning is key. If you follow these tips, you'll be well on your way to your goal. Keep at it, and eventually, you'll have saved enough—though remember, it'll likely take years.