Step 4: How to Budget and Save for a Home Purchase

Why Budget Now?

Before you can save, you need a clear snapshot of how much money you make and where it goes. When you prepare a household budget, you gather your income, bills, and spending so you know exactly what to expect each month. Many buyers underestimate the cost of owning a home and end up “house poor”—spending so much on housing they struggle with other bills. A smart budget helps you avoid that.

1Gather Your Income and Bills

1. Collect pay stubs or records of all income.
2. List regular bills like utilities, rent, insurance, phone, internet.
3. Track optional spending—like coffee, subscriptions, dining out.
4. Note how much you save each month right now.

Bring together recent bank statements, receipts, and pay records to build a complete picture.

2List Everything Monthly

Create simple columns:

• Income: take-home pay or other household income.
• Fixed bills: rent, utilities, car payments.
• Variable spending: food out, coffee, entertainment.
• Savings: what you already save.

This shows your total income and expenses and helps you find areas to cut or shift toward savings.

3Review Budget vs Actual

At month’s end, compare your planned budget to real spending. Ask:

• Did you spend more or less?
• If you have extra, can you use more for savings?
• If you overspent, where can you trim?

A budget review helps adjust your plan so you are staying on track and not overspending.

4Plan Around Home Costs

Homeownership brings new expenses beyond just a mortgage. Think about:

• Property taxes
• Home insurance
• Utilities and maintenance
• Possible HOA dues

These items make up your monthly expenses for homeownership. By including them now in your budget, you can avoid surprises later.

5Set Smart Savings Goals

If you are saving for a down payment, the first step is to decide how much you need. Many people think they need 20 percent down, but that is not always true. There are low down payment options available for first-time homebuyers—some as low as 3 percent or even zero down. The exact amount you need depends on the loan program that is best for you.

The smart move is to talk with one of our mortgage professionals. We can help you understand your loan options and what kind of down payment fits your goals.

Once you have a target amount, break it into monthly savings goals. Set up a separate savings account just for your home fund. Make saving automatic if you can, and put that money aside before spending on extras.

Even small steps matter. If you stay focused and stick with it, you will be ready to buy sooner than you think.

6Cut Back and Redirect

Look at your variable spending and ask:

• Can I skip one fewer coffee per day?
• Can I cook instead of eating out a few times?
• Are there services or subscriptions I don’t use?

Even small savings—like bringing lunch or cutting one streaming service—adds up. Put those savings toward your down payment.

7Build an Emergency Cushion

Rent almost always goes up over time.

Owning your home, especially with a fixed-rate mortgage, protects you from those increases. Your payment stays the same for the life of your loan. This predictability makes it easier to plan your budget—and your future.

Putting It All Together

Task	What to Do
Prepare a household budget	Gather and list income, bills, expenses
Track actual spending	Compare budget vs real cost each month
Factor in homeownership costs	Add taxes, insurance, utilities, repairs
Save for a down payment	Set goals and allocate part of income
Cut unnecessary variable spending	Redirect towards savings
Build emergency fund	Save at least a few months of living costs

Mid-Content Tip

Remember, when you want to prepare a household budget, you are taking control of your finances and reducing stress as you work toward homeownership.