How to Budget and Save to Buy a House
by: Mark H. Stowers
The American Dream—buying your own home—can feel out of reach without a clear plan. While winning the lottery is one option, a far more realistic path involves disciplined budgeting and intentional saving. Turning the idea of homeownership into reality means replacing wishful thinking with action. At Jim Shaffer & Associates, we believe preparation is the foundation of a successful purchase.
How to Budget and Save to Buy a House
With nearly four decades of experience in the mortgage industry, Tim B. Smith, Senior Mortgage Banker at First Merchants Bank, offers practical guidance for buyers looking to move from dreaming to doing. According to Smith, the very first step is simple but crucial: start saving now. For buyers looking for additional context, our home buying education blog is a helpful place to explore early-stage planning tips.
“I would recommend that anyone considering purchasing a home begin with a preapproval appointment with a qualified mortgage lender,” Smith explains. During this process, lenders review a buyer’s full financial picture and determine how much they may qualify for. From there, mortgage options and down payment requirements—ranging from zero down to 20 percent—can be evaluated. This clarity helps buyers understand the total cash needed to close and creates a realistic savings goal.
Smith notes that there are multiple ways buyers can accumulate funds for a purchase. Common sources include dedicated savings accounts, gifts from family members, proceeds from selling assets, 401(k) loans, investment liquidations, or equity from selling a current home. Buyers working with an experienced professional—such as one of our local real estate advisors—can better align these options with their long-term plans.
Another helpful strategy is requesting seller concessions to cover part or all of the closing costs, depending on the loan program. Budgeting plays a critical role here. As a general rule, Smith advises that total housing costs—including principal, interest, property taxes, insurance, and HOA fees—should stay around 34 percent of gross monthly income. Combined with other debts, total obligations should typically remain below 43 percent.
Buyers should also plan for future expenses. Property taxes can increase after a purchase, and understanding local tax trends is essential. Many buyers researching communities through our local neighborhood guides also consider how taxes and long-term affordability factor into their decision.
Creativity and discipline are key when saving. Cutting unnecessary expenses, setting up a dedicated savings account, and automating monthly deposits can make a significant difference. Some buyers allocate bonuses or extra income directly toward their home fund. These habits not only accelerate savings but also build confidence heading into the buying process.
Borrowers can begin their journey by completing a mortgage preapproval application and continuing their education through reputable homeownership resources. Pairing financial preparation with guidance from our experienced real estate team ensures buyers are well-positioned when the right opportunity arises.
Transform your homeownership goals into action with a focused budget and savings plan. Consistency and commitment will bring you closer to owning a home sooner than you think. If you’re ready to take the next step, exploring your numbers with a professional or even estimating your buying power alongside tools like our home value insights can help you plan with confidence.