How to Save for a House: A Step-by-Step Guide

Saving enough money to buy a house might seem like scaling a financial Mount Everest, but don't let that stop you from taking the first steps. Once you get moving, you might find the peak more accessible than you expected.

Here's how to begin the climb.

Homebuying costs, such as the down payment and closing costs, are often expressed as a percentage of the home price. First, determine an affordable price range for your house hunt. (Need help? Use our calculator to see how much house you can afford.) Then, with a purchase price in mind, you can set a specific savings goal.

The biggest hurdle is often the down payment — so let’s start there.

Saving for a down payment

The down payment is the upfront cash you pay to buy a house. Then, you finance the rest of the house with a home loan, or mortgage. Requirements differ by loan type, but your down payment can be as low as 3%, especially if you've got a solid credit score and manageable debts.

To save for a down payment, start by knowing the minimum requirement for the type of loan you plan to get. Common mortgages include:

• Conventional loans. Most mortgages are conventional loans, which adhere to conforming loan standards set by Fannie Mae and Freddie Mac. These standards can make qualifying for a conventional mortgage harder. However, with some conventional loan programs, you can make a down payment as low as 3%.

• FHA loans. FHA loans are backed by the Federal Housing Administration and require as little as 3.5% down. Required down payment amounts vary by credit score, however.

• VA loans. Backed by the U.S. Department of Veterans Affairs, VA loans let borrowers skip the down payment. VA loans are limited to current and former U.S. service members and qualifying spouses.

• USDA loans. USDA loans, which are backed by the U.S. Department of Agriculture, usually don't require a down payment. These loans are for borrowers in rural and suburban areas and can have income limits.

• Jumbo loans. Mortgages that go beyond conforming loan limits are called jumbo loans. Because these mortgages can't be insured or backed the way other loans can, lenders often require higher down payments, starting at 10%.

Maybe you already have some money saved. Wondering how far it’ll go? NerdWallet’s down payment calculator can help you see your savings as a percentage of different home prices.

» MORE: See our picks for best no- and low-down-payment mortgage lenders

Saving for closing costs and other expenses

The down payment is the biggest expense, but it’s not the only one. You’ll also need to budget for:

• Closing costs. These are the fees you pay to finalize a mortgage and are typically about 2% to 6% of the loan amount. A closing costs calculator can help you estimate how much you’ll pay for different home prices.

• Moving and other expenses after you buy the home. Even if the house is in turnkey condition, you may find yourself making a surprising number of trips to hardware and home furnishing stores. Learn how much it costs to move.

Once you have a rough estimate for each expense — down payment, closing costs and other cash to have on hand — add it all up. That big number is your savings goal.

» MORE: How much money should I save for a house?