The Homebuyer’s Dilemma: Determining the Right Amount to Save for Your Dream Home

By  //  July 26, 2023

Buying a home can be exciting and daunting, with one major question looming over prospective homebuyers: How much should I save money for a home? The homebuyer’s dilemma lies in finding the balance between affordability and aspirations.

This article delves into the factors that influence the amount you should save, such as location, property type, and personal finances. By understanding these considerations, potential buyers can make informed decisions and set realistic saving goals to achieve their homeownership dreams.

Set a Clear Savings Goal

Buying a home is a big financial goal that will require some sacrifice. The first step is to determine a savings goal you can reach within a realistic timeframe. Then reverse engineer the money you will need to save each month to achieve that goal.

Creating a savings plan that is both manageable and measurable will help you stay motivated as you work toward your goal. You can also seek support from family and friends who care about your success. Consider joining an online community that can offer you motivation, support, and advice.

Prioritize Saving

Getting to that white picket fence starts with getting your finances in order. It’s a good idea to focus on saving and investing with specific purposes, such as a down payment for a dream home.

A good rule of thumb is to save at least 20% to avoid paying for expensive mortgage insurance.1

However, paying off consumer debt is the most critical step in establishing a savings plan. This will free up your income to put toward savings.

Next, establish an emergency fund for 3-6 months’ expenses. This will allow you to weather unforeseen financial blows such as job loss, illness or an HVAC crisis without reverting to living paycheck-to-paycheck. Investing additional funds in accounts like bank FDs or life insurance policies is also smart. By leveraging these assets, you can maximize their value and accelerate your house down payment goals. Moreover, it’s wise to seek the guidance of a qualified financial advisor or professional who can offer personalized advice for your situation.

Reduce Debts

Paying down debt is important because it reduces your interest payments and frees up money that can be put toward a down payment. You can use a debt reduction calculator to help determine the best strategy for your situation. If you’re unsure where to start, there are also many resources online that provide step-by-step guidance. A good place to begin is by looking at your budget and identifying where you spend the most monthly. This will help you determine how much you can afford to save and where you can cut back to throw more at your debt snowball.

This process may require sacrifice, but you should know that the money you’ll save each month will add up to thousands over time. Consider reducing spending on things like eating out, premium coffees, and shopping for items you don’t need. These small changes can add up to significant savings, which you can put toward your down payment on your dream home.

Increase Income

Owning a dream house might seem impossible with rising real estate prices and stagnant wages. But with the right savings strategy, everyone has a shot at homeownership. Start by setting clear goals, budgeting, and informing yourself about mortgages.

Increasing your income is another innovative way to save for a home. Look for opportunities to take on a side hustle, such as freelance writing or painting and more online money making oppurtunities. You can also consider investing your money. If you are interested in learning more about investing, you can find a lot of helpful information on the internet and in books.

Manage and Reduce Debt

Purchasing a dream home requires careful budgeting and a savings plan. It may feel like a tall order with skyrocketing real estate prices and a low homeownership rate among millennials. Still, saving for your dream home in a reasonable timeframe is possible with the right approach.

One of the most important things you can do to improve your homeownership chances is to pay off consumer debt. This will reduce your monthly expenses, improve your credit score, and make qualifying for a mortgage loan easier.

If you can’t cut your spending on non-essentials, consider increasing the amount you save by automating your payments or making it more inconvenient to spend your money. Having someone else hold you accountable for your goal can be another helpful strategy for managing your finances.

Save and Invest

Having enough money to buy your dream home is one of the biggest goals for many people. This goal can become a reality if you save smartly and make wise investment decisions.

You should set a savings goal that is realistic and attainable within a reasonable timeframe. It is also essential to save for a down payment and other expenses related to homeownership.

You should also start saving in a high-yield savings account or an online wealth management app. These accounts offer better interest rates than traditional savings accounts and can help you save faster. You can also invest your cash in mutual funds and real estate to earn more money.

Explore First-Time Homebuyer Programs

First-time homebuyer programs can help you overcome many of the barriers to homeownership. They can include grants (cash you don’t have to pay back) and loans with low-interest rates or forgiven after several years. They can be a great way to reduce your mortgage costs and save you money over time.

For example, NeighborhoodLIFT offers up to $20,000 in support for a down payment on a one- or four-family home, townhome, or condo in Brooklyn, Queens, or the Bronx. You can apply for this program online and see if you’re eligible to receive help. This is just one of the nationwide programs that can make homeownership more attainable for you.

Consult With a Mortgage Advisor

When saving for your dream home, seeking advice from a mortgage advisor can be a game-changer. Their specialized knowledge and experience can assist you in navigating the complexities of the housing market and financial landscape. By collaborating with a mortgage advisor, you can receive personalized guidance, gain clarity on budgeting and mortgage options, and increase your chances of securing a loan pre-approval. With their expertise and support, you can set realistic saving goals and develop a solid plan to make your homeownership dreams a reality. Don’t hesitate to leverage the benefits of a mortgage advisor on your path to purchasing your dream home.


Determining the right amount to save for your dream home is crucial in the quest for homeownership. Potential homebuyers can balance their aspirations and financial reality by carefully analyzing location, property type, and personal finances. It is essential to consider factors such as down payments, closing costs, and future maintenance expenses to avoid being overwhelmed by the financial burden. Finding the right savings goal will ultimately pave the way for a successful and satisfying home buying journey. The dream of owning a home can become a reality with prudent planning and financial discipline.