How to save money for a house: Practical tips in 2025

Owning a home is an exciting milestone—a chance to plant roots, build a future and grow within a community. With thoughtful planning and clear goals, saving for a house is achievable.

The housing market shifts over time, and in 2025, it continues to evolve. Mortgage rates are expected to remain above 6% for much of the year while home prices are projected to rise at a slower pace than in previous years. Inventory is improving in some areas, giving buyers more options, but there are still some challenges.

Understanding how to save money for a house is key. Knowing how to grow your savings, where to keep your money and which budgeting tips to follow can help turn your dream of homeownership into reality. Here's how to get started.

The first step to saving for a down payment is understanding your current financial situation, particularly assets and liabilities. Breaking the process into manageable pieces can make it less overwhelming and more actionable.

Review your current savings, including funds in savings accounts, emergency funds and other liquid assets. This can give you a starting point to run the numbers and build a budget for your home fund. To stay organized, consider opening a dedicated savings account for your down payment and related homebuying expenses. Watching your progress grow in a separate account can keep you motivated and focused on the goal.

Check out savings account options from Thrivent Credit Union.

The type of loan you choose and the home's cost determines your down payment. While a 20% down payment can help you avoid private mortgage insurance (PMI), many lenders offer lower down payment options. In 2024, the National Association of Realtors found the median down payment was 18% for all buyers and 9% for first-time homebuyers. A larger down payment can reduce your monthly mortgage payment and eliminate PMI, which generally costs between 0.2% and 2% of the monthly loan amount.

Is it possible to buy a house with no money down? Find out.

Homeownership assistance programs are available for those who meet certain requirements. This can make buying a home more affordable. Here are a few options to explore:

• Federal programs. The Federal Housing Administration, Veterans Administration and U.S. Department of Agriculture offer loans with low down payments or even no money down and flexible credit requirements to those who qualify.
• Low-income programs. You may qualify for the Housing Choice Voucher. The U.S. Department of Housing and Urban Development has a discount program exclusively to help police, firefighters and EMTs own homes in revitalized areas.
• State, county and city programs. Check with your state housing finance agency and other state and local home assistance programs. Many offer affordable rates and down payment deals for residents.

Homeownership involves more than just a down payment and monthly mortgage. Be prepared for:

• Closing costs. Usually, closing costs are around 2% to 5% of the loan amount, covering appraisal and inspection fees, realtor commissions, insurance, property taxes and legal expenses.
• Maintenance and repairs. Try saving about 1% to 3% of your home's value annually for upkeep.
• Move-in expenses. Budget for furniture, repairs and any necessary updates when you first move into your new home.

Setting aside an emergency fund for unforeseen costs can help you transition more smoothly into homeownership. If you're debating whether it's a good idea to buy a house right now, preparing for these additional costs can help ensure you're ready when the time is right.

Figuring out how much you need to save begins with knowing what you can afford. Then you can create realistic savings goals for your down payment and other costs.

Start by calculating your total monthly income and expenses. Consider your current savings and how much you can realistically set aside each month. Use budgeting apps or spreadsheets to track spending and identify areas to cut back to give you a clearer picture of what you can comfortably afford.

Next, consider your debt-to-income (DTI) ratio, a key metric lenders use to assess your mortgage eligibility. Ideally, aim for a DTI of 35% or lower, including your future mortgage payment. If it's higher, focus on reducing debt while building your savings.

Before setting your savings target, it's important to understand what kind of mortgage payment fits within your budget. Mortgage payments typically include the loan principal, interest, property taxes and insurance, but other costs can add up.

To determine an affordable range:

• Try to keep your mortgage payment at no more than 25% to 35% of your monthly take-home pay to avoid stretching your finances too thin. Remember, you are in control of your mortgage payment. It's not how much you qualify for, it's how much you want to spend. You want to maintain some financial flexibility for your usual expenses, other savings goals and emergencies.
• Factor in additional costs like utilities, property maintenance and homeowner association fees (if applicable) as well as extra savings for repairs.
• If you're renting while saving, compare how much more (or less) you could afford and consider trimming expenses like dining out or subscriptions to free up more savings.

Example calculation: If your take-home pay is $8,000 per month, a mortgage range of $2,000 to $2,800 per month would be within 25% to 35%. Understanding these numbers can help you determine a realistic home price and down payment goal, so you're saving with a clear target in mind.

Once you've determined your target home price, calculate your down payment goal. For a $450,000 home, your down payment depends on the percentage you choose:

• 5% down is $22,500
• 10% down is $45,000
• 20% down is $90,000

A 20% down payment eliminates PMI and can reduce your monthly payment, but even a smaller amount can help you get started.

As you create a savings plan for your future home, it's essential to balance your current financial needs with your long-term goals. Budgeting helps ensure you consistently set aside money for your house fund while covering essentials and enjoying life.

Start by tracking your monthly spending. Separate fixed costs, like rent and utilities, from discretionary expenses, like eating out or shopping. This helps identify areas to reduce spending and redirect funds toward your house savings.

Adopting a budgeting approach, like the 50/30/20 budget, can make it easier to manage your money. Consider temporarily scaling back on wants and wishes to increase savings. Another popular savings approach is zero-based budgeting. This budget can help you maximize your savings for a specific goal, like a down payment.

Once your budget is in place, set a realistic timeline for buying a home. Choose a target date for your savings and work backward to calculate your monthly savings needs. For instance, if you need $20,000 for a down payment in two years, aim to save about $833 per month.

Ultimately, your goal is to find a balance that helps you make steady progress toward saving without compromising your other needs and overall financial health.

Your savings timeline can seem like a challenging road ahead. But there are many ways to trim your monthly spending, and those little changes add up in the long run. These budgeting tips can help you grow your home savings faster:

• Cut back where you can. Inflation means prices are higher, but sticking to a budget and living within your means is worth it. See if your service providers offer discounts on monthly bills. Any monthly savings can go toward your down payment.
• Consider a part-time job. If there's room for it, you could land a part-time job with an employer or join the gig economy as a freelancer. From ride-sharing to pet-walking, making extra cash can build your home savings faster.
• Save any extra money. Depositing regular cash windfalls, like an annual bonus or a tax refund, into your down payment savings can help speed up your progress.
• Refinance debts. Saving for a down payment while managing debt is possible. Reduce your debt burden and free up more cash by using the debt snowball or debt avalanche method. These strategies can help you pay off loans faster. Also, consider refinancing high-interest debts to a lower-interest loan. Transfer balances on high-interest credit cards to a lower-interest credit card or a card with a 0% APR promotion can also help.

Where you keep your money is just as important as how much you save, especially in a high-interest economy. Choosing the right account for your savings is key. Interest-earning accounts can help your money grow while still keeping it accessible when you need it.

Here are a few places to save money for a home:

• Money market accounts combine the flexibility of a checking account with the ability to earn interest. These accounts could be ideal if you're close to buying a home and need quick access to your funds.
• High-yield savings accounts often provide higher interest than money market accounts, helping your savings grow faster. You can link this account to your primary checking to make transfers seamless when using your funds.
• Certificates of deposit (CDs) may offer even higher interest rates than high-yield savings or money market accounts but require you to lock in your funds until the CD matures. CDs can be a good choice if your timeline lets the money sit for six to 12 months.
• Homebuyer savings accounts are available in some states for first-time buyers. These accounts offer tax advantages while earning interest, making them an option to consider if you qualify.

Revisit your plan and monitor your progress regularly (monthly or quarterly). You may find it easier to cut back in certain areas than you thought or realize you didn't allocate enough money for a specific line item.

And don't be afraid to adjust your plan as needed. While there may be periods when you can't save as much as you would like—such as during a job transition or when facing an unexpected expense—consistency is key. Even small amounts saved each month can add up significantly over time.

Reach your savings target as efficiently as possible by setting up an automatic deposit or transfer from your checking account to your interest-bearing savings account. Automating your contributions helps you stay on track and maximize your savings potential without extra effort.

If you're planning to buy a house in 2025, you'll want to keep an eye on key market trends like mortgage rates and inflation.

In the first quarter of 2025, inflation was at 3.3%, down from 2022's highs but still above the Fed's target range between 2% and 3%. While economists predict inflation will remain slightly elevated early in 2025, it's expected to come down below 3% by the fourth quarter.

For homebuyers, a decline in inflation can improve purchasing power, making it slightly easier to reach savings goals. However, rising home prices can offset some of these benefits, which is why it's important to have a strategic savings strategy. Interest-earning accounts, like high-yield savings, can help protect your savings from inflation.

The Federal Reserve made three rate cuts in 2024 and suggested cuts would likely be made at a slower pace in 2025. Even though the Fed has cut interest rates, mortgage rates are still on the higher side, hovering around 6.76% for 30-year fixed loans.

Experts predict mortgage rates will slowly come down throughout 2025 but likely stay around 6.3% and 6.5%. Lower rates can help improve affordability, but many buyers still may face some challenges balancing rising home prices and borrowing costs.

Many potential homebuyers ask, "Is the housing market going up?" A combination of inventory levels, mortgage rates and broader economic factors will shape the housing market in 2025.

However, experts predict several homebuying trends that potential buyers should be aware of, including:

• Home prices. Home prices are still expected to rise in 2025 but at a slower pace than in previous years, primarily due to a lack of inventory.
• Inventory. The housing supply is increasing, but existing home inventory remains tight.
• New construction. New home builds are expected to rise, providing additional inventory in some markets.
• Affordability. Affordability challenges still exist, but income growth along with strong home equity and stock market gains may help buyers put more toward down payments.
• Rental market. With rental prices remaining stable or decreasing, some buyers may consider continuing to rent as a short-term option while they build savings.

Saving for a house takes time, so it's essential to find a balance between staying flexible and sticking to your spending limits. You can build the savings you need if you set clear goals, budget effectively and understand the upfront costs of homeownership. Home prices and mortgage rates are likely to remain high in 2025, so you may want to explore interest-earning accounts, automate your savings and consider federal or local assistance programs to help you reach your goal.

It also may be helpful to have a conversation with your local Thrivent financial advisor, who can work with you to create a realistic and productive plan.