Buying a home is one of the biggest financial decisions you’ll ever make.

If you’ve started researching online, you’ve probably been told you need a 20% down payment, perfect credit, and a mortgage pre-approval before you even think about house hunting. While those things can certainly help, they don’t answer the question that actually matters:

How much can you comfortably afford without sacrificing your financial freedom?

Key Takeaways

• There’s no one-size-fits-all savings goal. While a 20% down payment can help you avoid PMI, it’s not the only path to homeownership.
• Don’t let your lender determine your budget. Just because you’re approved for a certain amount doesn’t mean it’s the right amount for your lifestyle and long-term financial goals.
• Aim to keep your total housing costs around 25% of your take-home pay. This helps you avoid becoming house poor and leaves room for saving, investing, and enjoying life.
• Plan for more than just the down payment. Closing costs, moving expenses, an emergency fund, and future home maintenance should all be part of your savings plan.
• Prepare for life’s unexpected moments. Building your budget around financial flexibility can make job changes, income reductions, or unexpected expenses much easier to navigate.
• Keep your house savings in the right account. A high-yield savings account is often a smart choice for short-term savings goals because it keeps your money accessible while earning more interest.
• Use a zero-based budget to save consistently. Giving every dollar a purpose while automating your savings can help you reach your home-buying goal without feeling deprived.

When my husband and I bought our first home in 2015, we were first-time homebuyers in our early twenties. We were renting an apartment in a house, and our landlord was considering selling the property.

When we looked at rents in our area, it was more than the potential mortgage payments we were seeing for less room. On top of that, the thought of having to move again didn’t sit well with me. I spent most of my childhood in one home so stability mattered to me. Buying started to make sense financially and personally.

But there was one thing we didn’t do…we didn’t let the bank decide what we could afford.

Instead of shopping based on the number printed on our mortgage pre-approval, we built our own plan around something much more important: what would allow us to sleep well at night.

That decision paid off years later.

When COVID affected my husband’s work, his hours were reduced significantly for about a year, cutting his annual income roughly in half. While it certainly wasn’t ideal, it also wasn’t a financial crisis.

Why? Because we’d planned for life to life.

We had an emergency fund and we intentionally chose a mortgage payment we knew we could manage. Instead of panicking, we simply adjusted.

That experience reinforced something I want every homebuyer to know:

Buying a house isn’t about purchasing the biggest home you qualify for. It’s about buying a home that supports the life you want to live.

If your goal is financial freedom, and not financial stress, this guide will show you exactly how to build a home-buying plan that works for your life.

You’ll learn:

• How much you should realistically save before buying a house
• Whether you really need a 20% down payment
• How to determine what you can comfortably afford
• The savings accounts that make the most sense for your home fund
• How to prepare for the hidden costs of homeownership
• Why becoming “house poor” is one of the biggest financial mistakes you can avoid

Let’s start with the question everyone asks first.

Is a 20% Down Payment Really Necessary?

If you’ve spent any time researching home buying, you’ve probably heard the same advice repeated over and over:

“You need a 20% down payment.”

While that can absolutely be a great goal, it’s important to understand why people recommend it and why it isn’t the only path to homeownership.

Why a 20% Down Payment Is Often Recommended

Putting 20% down offers several advantages.

It typically allows you to:

• Avoid paying Private Mortgage Insurance (PMI)
• Reduce your monthly mortgage payment
• Borrow less money overall
• Build equity immediately
• Pay less interest over the life of your loan

Those are meaningful benefits.

If reaching a 20% down payment fits your timeline and financial goals, it can put you in a stronger position as a homeowner.

But here’s what I don’t want you to believe:

That you have to wait until you’ve saved 20% before buying a home.

My husband and I didn’t. When we bought our first home, we hadn’t saved a full 20% down payment, which meant we paid PMI.

Was it ideal? No.

Was it the right decision for our situation? Yes.

Because while we didn’t have a 20% down payment, we had something that mattered even more:

We bought a home that comfortably fit within our budget.

Too often, people focus exclusively on avoiding PMI while overlooking the much bigger financial risk:

Taking on a mortgage payment that’s difficult to sustain month after month.

PMI eventually goes away in time in most cases. But if you want to get it to go away faster without refinancing, you should check out this article next.

As for financial stress, it doesn’t disappear nearly as easily as PMI.

Remember, the Down Payment Isn’t Your Only Expense

One of the biggest surprises for first-time buyers is realizing the down payment isn’t the only expense involved in purchasing a home.

You’ll also need money for:

• Closing costs
• Moving expenses
• Utility deposits
• Initial furniture or household purchases
• Minor repairs or updates
• An emergency cushion after closing

The last thing you want is to celebrate getting the keys to your new home while your checking account sits at zero.

Owning a home should increase your sense of security, not eliminate it.

That’s why I encourage clients to think beyond the down payment itself.

Don’t just ask yourself if you can buy the house. Ask yourself: “Can I buy this house and still feel financially secure afterward?”

Because the strongest home-buying plans aren’t built around a single number.

They’re built around creating enough financial margin that your home becomes a blessing, not a source of constant stress.

How to Figure Out What You Can Actually Afford

One of the biggest mistakes I see first-time home buyers make is starting their house hunt with a lender’s pre-approval amount.

While getting pre-approved is an important step in the buying process, it shouldn’t become your shopping budget.

Think of it this way: A bank’s job is to determine whether you qualify for a loan based on your income, debt, credit score, and lending guidelines. They aren’t evaluating whether that monthly payment aligns with your personal goals.

They don’t know if you want to travel every year, if you’re working toward financial independence, if you’re planning to have children, switch careers, or eventually start your own business.

And they definitely don’t know how much peace of mind is worth to you.

That’s why I encourage women to create their own affordability number before they ever start browsing homes online.

When you know your number, you’re less likely to fall in love with a house that could quietly derail your financial goals.

Start With Your Monthly Take-Home Pay

One of my favorite guidelines is keeping your total housing payment at no more than 25% of your monthly take-home pay.

Notice I said take-home pay, not your gross salary.

Your gross income is the amount you earn before taxes, retirement contributions, health insurance, and other deductions come out of your paycheck.

Your take-home pay is the money that actually lands in your bank account each month. That’s the money you’re using to pay your bills, buy groceries, and fund your financial goals, so it makes much more sense to build your housing budget around it.

Here’s a simple example.

Let’s say your monthly take-home pay is $7,000.

Multiply that by 25% (0.25):

$7,000 × 0.25 = $1,750

That means your total monthly housing payment should ideally stay around $1,750 or less.

And when I say total housing payment, I don’t just mean your mortgage.

Include everything:

• Mortgage principal
• Interest
• Property taxes
• Homeowners insurance
• PMI (if applicable)
• HOA fees

Looking at the full picture gives you a much more realistic idea of what homeownership will actually cost each month.

Why I Prefer the 25% Guideline

You’ll find plenty of different recommendations online.

Some financial experts suggest spending up to 28% of your gross income. Others recommend even more.

Could you make those numbers work? Maybe.

But I like building plans with room for error.

Life has a way of throwing unexpected expenses your way, and I’d rather see you enjoy your home than constantly worry about making the next mortgage payment.

Keeping your housing costs around 25% of your take-home pay creates breathing room for the things that matter just as much as homeownership.

It allows you to continue:

• Building your emergency fund
• Investing for retirement
• Saving for vacations and experiences
• Covering unexpected expenses without relying on credit cards
• Working toward other financial goals

Owning a home should be one part of your financial life, not the only thing your paycheck can support.

What Happens If Your Dream Home Doesn’t Fit Your Budget?

This can be disappointing, especially if you’ve already started imagining yourself living there.

But I want to offer a different perspective.

Sometimes the smartest financial decision isn’t buying the house you love today. It’s buying the house that allows you to keep loving your life tomorrow.

That might mean:

• Looking in a different neighborhood.
• Buying a slightly smaller home.
• Waiting another year to save more.
• Choosing a townhouse instead of a single-family home.

None of those decisions mean you’ve failed. In fact, they often put you in a much stronger financial position over the long term.

The goal is to make a decision that supports your future, not one that stretches your finances so thin that every unexpected expense feels like an emergency.

Stress-Test Your Budget Before You Buy

Here’s an exercise I would recommend to every future homeowner.

Before you make an offer on a house, ask yourself:

“What happens if my income changes?”

It’s not the most exciting question, but it might be one of the most important.

If you’re buying with a spouse or partner, ask:

Could we continue making this mortgage payment if one of us temporarily lost income?

If you’re buying on your own, ask:

Could I still comfortably afford this home if my income dropped for a period of time?

Notice I didn’t say forever. Things happen.

Companies downsize.

Industries slow down.

People change careers.

Unexpected situations arise.

Years after we bought our home, my husband’s work hours were significantly reduced because of the economic effects of COVID. For about a year, his income was roughly half of what it normally was.

That could have completely changed our financial situation. Instead, it became an adjustment.

Because we had an emergency fund and intentionally bought a home that fit comfortably within our budget, we weren’t scrambling to figure out how we’d make the mortgage payment.

We tightened up a few areas of our spending, but our home never became a source of panic.

Looking back, that experience reminded me why buying below your maximum budget isn’t being overly cautious.

It’s giving yourself options.

Your Home Should Support Your Financial Freedom

I know it can be tempting to stretch your budget when you find a home you love.

You tell yourself you’ll earn more next year, you’ll refinance later, or you’ll figure it out somehow.

And yea….sometimes that works out. But sometimes life has different plans.

That’s why I encourage you to think about homeownership through a different lens.

Instead of asking:

“Can I qualify for this mortgage?”

Try asking:

“Will this mortgage still allow me to build wealth, enjoy my life, and sleep well at night?”

Those questions lead to very different decisions.

A home should be a place of comfort and security, not the reason you’re stressed every time another bill arrives.

Don’t Forget to Budget for Home Maintenance

One of the biggest adjustments you’ll make as a homeowner has nothing to do with your mortgage.

It has to do with realizing there’s no landlord to call anymore.

When you’re renting and your water heater stops working, you submit a maintenance request and wait for someone else to fix it.

When you own your home, that responsibility—and that bill—belongs to you.

It’s one of the most overlooked costs of homeownership because it doesn’t show up on your mortgage estimate or closing disclosure. But it’s just as real as your monthly payment.

That’s why I recommend creating a separate home maintenance fund before you need it.

How Much Should You Save for Home Maintenance?

A common rule of thumb is to set aside 1% to 4% of your home’s value each year for maintenance and repairs.

The exact amount will depend on several factors, including:

• The age of your home
• The condition of major systems like the roof and HVAC
• Whether previous owners kept up with maintenance
• The climate where you live

For example, if your home is worth $400,000, saving 1% annually means putting away about $4,000 each year, or roughly $333 each month.

Now, does that mean you’ll spend exactly $333 every month? Not at all.

Some months you won’t spend anything. Then one day your water heater stops working, your dishwasher quits, or your HVAC system needs an expensive repair.

Instead of putting that expense on a credit card or dipping into your emergency fund, you’ll already have money set aside specifically for your home.

That’s exactly what a sinking fund is designed to do.

Your Emergency Fund and Home Maintenance Fund Have Different Jobs

This is a mistake I see people make all the time. They assume their emergency fund will cover everything.

While it certainly can if needed, I prefer giving these savings two separate purposes.

Your emergency fund is there for life’s major financial emergencies, like:

• Job loss
• Medical expenses
• Unexpected income reductions
• Family emergencies

Your home maintenance fund is there for the expected costs of owning a home.

Because your roof will eventually need replacing, your appliances won’t last forever, and your driveway may need repairs.

These aren’t financial emergencies but the cost of homeownership.

Planning for them ahead of time helps protect your emergency fund for the situations it was actually designed to cover.

Where Should You Keep Your House Savings?

Once you’ve decided how much you want to save, the next question becomes:

Where should that money actually live?

Surprisingly, this is something many people never think about.

They leave their house savings sitting in the same checking account they use to pay bills every month.

The problem? Checking accounts usually earn little to no interest so your money isn’t working very hard for you.

If You’re Buying Within the Next Five Years

If your goal is to purchase a home within the next one to five years, your priority shouldn’t be earning the highest possible return.

It should be keeping your money:

• Safe
• Accessible
• Growing steadily

Because you’ll likely need those funds soon, you don’t want to take unnecessary risks by investing money you’ll need for your down payment.

For most people, a high-yield savings account (HYSA) is one of the best places to keep short-term house savings.

Unlike traditional savings accounts that often pay very little interest, high-yield savings accounts allow your money to earn significantly more while remaining easily accessible.

Personally, I like using Ally Bank for savings goals because it allows you to organize multiple savings buckets within one account. If you’re saving for a down payment, closing costs, moving expenses, and a home maintenance fund, being able to separate those goals can make your progress much easier to track.

The important thing is choosing an account that’s separate from your everyday spending so you’re less tempted to dip into your house fund for unrelated expenses.

What About Certificates of Deposit (CDs)?

If you know your home purchase is still several months away and you won’t need immediate access to your money, a Certificate of Deposit (CD) may also be worth considering.

A CD allows you to lock in an interest rate for a specific period of time in exchange for leaving your money untouched until the term ends. That predictability can be appealing if your home-buying timeline is relatively fixed.

Just remember that withdrawing your money early may come with penalties, so make sure the timing works for your situation before locking your funds away.

What If You’re More Than Five Years Away?

If buying a home is still several years down the road, you may have more flexibility.

Because your timeline is longer, you might consider investing a portion of your savings or exploring other options like Treasury securities. The extra time gives your money more opportunity to grow, but it also means accepting some level of market risk.

The right strategy depends on your timeline, your comfort with risk, and how flexible your home-buying plans are.

If you’re unsure, it’s perfectly okay to start with a high-yield savings account and adjust your strategy as your goals become more defined.

The most important thing is simply getting started.

Saving Doesn’t Have to Mean Sacrificing Everything You Enjoy

One of the biggest misconceptions about saving for a house is that it requires putting your entire life on hold.

People imagine saying no to every dinner out, every vacation, every coffee run, and every fun experience until they’ve finally saved enough.

That’s not the approach I recommend. Building wealth isn’t about making yourself miserable but instead being intentional.

If every dollar disappears from your account without a purpose, it becomes much harder to make meaningful progress toward your goals.

But when every dollar has a job, saving becomes much more predictable.

That’s why I’m such a believer in zero-based budgeting. Despite the name, it isn’t about restricting yourself.

It’s about creating a plan for your money before the month begins. Instead of wondering where your paycheck went, you decide in advance where every dollar will go.

That includes your bills, your groceries, entertainment, retirement contributions, and your house fund.

When your savings become part of your monthly plan instead of an afterthought, they’re much more likely to happen consistently.

One of the easiest ways to make this process even simpler is to automate your savings.

Set up an automatic transfer from your checking account to your dedicated house savings account every payday.

Treat it like any other bill. You don’t wait to see if you have money left over for your electric bill.

Don’t wait to see if you have money left over for your future home, either. Pay your future self first.

Your Next Steps Before You Start House Hunting

We’ve covered a lot in this guide, so let’s bring it all together into a few practical action steps you can take today.

1. Determine Your Comfortable Monthly Housing Budget

Before you browse another listing or attend another open house, figure out what you can comfortably afford.

Start with your monthly take-home pay and use the 25% guideline as a starting point. Remember to include your entire housing payment:

• Mortgage principal
• Interest
• Property taxes
• Homeowners insurance
• HOA fees (if applicable)
• PMI (if applicable)

This gives you a realistic monthly budget that supports your financial goals instead of competing with them.

2. Decide on a Down Payment Goal

There’s no one-size-fits-all answer.

If saving 20% is realistic for your timeline, that’s fantastic. Eliminating PMI and reducing your monthly payment can put you in an even stronger financial position.

But if waiting several more years to reach 20% means delaying homeownership when buying otherwise makes sense for your situation, don’t assume you’ve failed.

The better question is this:

Can you comfortably afford the home after you buy it?

3. Build an Emergency Fund

If there’s one lesson my own experience reinforced, it’s this:

Life doesn’t wait until you’re financially “ready.”

When my husband’s income was reduced during COVID, we weren’t scrambling because we’d already built an emergency fund into our financial plan.

That fund gave us options, reduced stress, and allowed us to focus on adjusting instead of panicking.

Your emergency fund provides financial peace of mind.

4. Create a Home Maintenance Fund

Remember, becoming a homeowner means becoming your own landlord.

Things will eventually need to be repaired or replaced and planning for those expenses now helps you avoid relying on debt later. Even setting aside a small amount each month can make a huge difference over time.

5. Open a Dedicated Savings Account

One of the simplest ways to stay consistent is to separate your house savings from your everyday spending.

Whether you’re saving for:

• Your down payment
• Closing costs
• Moving expenses
• Home maintenance

Keeping those dollars in a dedicated high-yield savings account makes it easier to track your progress and harder to spend the money impulsively.

6. Automate Your Savings

Consistency almost always beats perfection. Instead of trying to remember to transfer money every month, automate it.

Even if you’re only starting with a small amount, building the habit now will move you closer to your goal than waiting until you feel like you can save more.

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Frequently Asked Questions About Saving for a House

Final Thoughts

When people ask me how much they should save before buying a house, I always think back to our own experience.

We didn’t buy our first home because everything was perfect.

We didn’t have a 20% down payment and we couldn’t predict what the next five or ten years would look like.

What we did have was a plan and we chose a home that fit comfortably within our budget instead of stretching ourselves to the lender’s maximum approval amount.

Years later, when my husband’s income was cut significantly for a period of time, that decision gave us something money can’t always buy…peace of mind.

Looking back, I don’t believe the smartest part of our home-buying journey was purchasing a house.

It was purchasing a house that still allowed us to weather an unexpected season without losing sleep over our finances.

That’s what I want for you, too.

Homeownership should create stability and support the life you’re working so hard to create.

It shouldn’t leave you wondering how you’re going to make next month’s mortgage payment.

At the end of the day, in buying a home you’re making a decision that supports your future self.

And sometimes, the smartest financial decisions aren’t the flashiest ones. They’re the ones that give you room to breathe.

Ready to Build Your Savings Plan?

If you’re serious about buying a home, or reaching any major financial goal, you want to build a savings strategy that works. That’s exactly why I created the Smart Savings Strategy Handbook.

Inside, you’ll learn how to:

• Overcome the mindset blocks that keep so many women stuck.
• Prioritize multiple savings goals without feeling overwhelmed.
• Calculate realistic monthly savings targets.
• Choose the right savings vehicle for each goal, including high-yield savings accounts, CDs, money market accounts, and more.
• Build a savings system that supports your long-term financial freedom.

Saving money shouldn’t feel confusing or restrictive.

With the right plan, you can make consistent progress toward your goals, whether that’s buying your first home, building your emergency fund, or creating the financial security you’ve been dreaming about. Click here to grab your handbook for $29.

Your future home starts with the financial habits you build today.