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Home Buying

How to Build Savings for Your First Home

Key Takeaways

  • First-time buyers should budget for a down payment, closing costs, and an emergency buffer. 
  • Down payments range from 0%–20% depending on the loan program. 
  • Closing costs often add 2%–5% of the purchase price. 
  • Cutting expenses, boosting income, and automating savings accelerate progress. 
  • Minnesota assistance programs can lower upfront savings requirements. 
  • A strong credit score reduces long-term costs, leaving more money for savings.

How to Build Savings for Your First Home

Saving for your first home can feel overwhelming, but with the right strategy, it’s more achievable than most people realize. From down payments to closing costs, first-time buyers in Minnesota and across the U.S. need a clear plan to accumulate enough funds to purchase confidently.

This guide answers the most common questions about building savings for your first home.

Why Is Saving for a Home Important?

Owning a home involves upfront costs like down payments, inspections, and closing fees. Without adequate savings, buyers may struggle to qualify for a mortgage or end up financially stretched after purchase. Building a savings plan ensures you’re ready for both the purchase and the responsibilities that follow.

How Much Should You Save for a Down Payment?

The required down payment depends on the type of loan:

If you’re purchasing a $250,000 home in Minnesota, a 5% down payment equals $12,500, while 20% equals $50,000. Setting a specific savings target makes the goal more tangible.

What About Closing Costs and Other Upfront Expenses?

In addition to a down payment, expect 2%–5% of the purchase pricefor closing costs. These include appraisal, title, loan origination, and attorney fees. On a $250,000 home, closing costs could range from $5,000–$12,500.

Budgeting for these costs prevents last-minute surprises at the closing table.

How Can You Create a Realistic Savings Goal?

Start by calculating the total you’ll need for down payment, closing costs, and an emergency buffer. Divide that number by the months until your goal purchase date. This will give you a monthly savings target to stick to.

For example, if you need $20,000 in two years, saving about $830 each month will get you there.

Which Savings Accounts Work Best?

Consider accounts that are safe, liquid, and earn interest:

  • High-yield savings accounts: Provide better interest than standard accounts. 
  • Money market accounts: Offer higher returns with easy access. 
  • Certificates of Deposit (CDs): Lock in savings for set terms with higher interest. 

The right account depends on your timeline and risk tolerance.

How to Build Savings for Your First House

How Can You Cut Expenses to Save Faster?

Small lifestyle changes can add up quickly:

  • Reduce dining out and subscription services. 
  • Negotiate lower bills for internet or phone. 
  • Shop for insurance rate reductions. 
  • Postpone large discretionary purchases until after closing. 

Redirecting these savings into a home fund can accelerate progress significantly.

Should You Pay Down Debt Before Saving?

Balancing debt and savings is key. High-interest debt, like credit cards, should be paid down first since it eats away at income. Lower-interest debts, like student loans, may be manageable while also saving for a home. Lenders will review your debt-to-income (DTI) ratio, so reducing debt improves your mortgage approval odds.

What Role Does Credit Play in Building Savings?

Improving your credit score doesn’t just affect mortgage approval — it also lowers your interest rate. Even a small improvement can save thousands over the life of a loan, leaving more room in your budget to save for upfront costs.

Are There First-Time Homebuyer Programs in Minnesota?

Yes. Minnesota Housing and other local organizations offer programs that reduce savings requirements:

  • Down payment assistanceloans or grants. 
  • Closing cost supportfor eligible buyers. 
  • Reduced-interest loansto make ownership more accessible. 

These programs can significantly lower how much you need to save upfront.

How Can Side Income Boost Your Savings?

Additional income streams can help you reach your savings target sooner:

  • Freelance work or consulting. 
  • Part-time jobs. 
  • Selling unused items online. 
  • Renting out space or equipment. 

Every extra dollar saved brings you closer to your homeownership goal.

Why Is an Emergency Fund Still Necessary?

While saving for your home, don’t neglect an emergency fund. Unexpected medical bills, car repairs, or job changes can derail your homebuying plans if you’re not prepared. Aim to keep three to six months of expenses set aside before or alongside saving for a home.

Can Automating Savings Make the Process Easier?

Yes — automation ensures consistency. Set up automatic transfers from your paycheck into a dedicated savings account. Even small, consistent deposits accumulate quickly over time.

Start Building Your Home Savings Plan Today

Saving for your first home may feel daunting, but the right plan makes it achievable. At Refined Lending, we help Minnesota first-time buyers create realistic budgets, explore loan programs, and access down payment assistance.

Contact Refined Lending todayand take the first step toward turning your savings into homeownership.