How to save for a down payment and prepare for homeownership

Buying your first home is an exciting step in your financial journey, but saving for a down payment can take time and planning. If you’re a first-time homebuyer considering this significant purchase, it’s helpful to look at how to build your savings, understand what you can afford, and prepare for each stage of the home-buying process before searching real estate websites or attending an open house.

Stage one: Build a savings plan for your down payment

Before you start touring homes, focus on building a savings plan for your down payment. Simple strategies like automating contributions, setting savings milestones, and directing bonuses or tax refunds toward your goal can help you make steady progress.

Pro Tip: Keep your down payment savings separate from your everyday banking to make it easier to track your progress and stay focused on your goal.

If you're a first-time homebuyer, a First Home Savings Account (FHSA) can be an effective way to save. Your advisor can help you determine how it fits into your homebuying timeline and overall savings strategy. You may also want to explore whether the Home Buyers' Plan could support your purchase.

As you save, remember to plan for more than just your down payment. Closing costs, legal fees, inspections, moving expenses, and utility setup costs can add up, so it's important to include them in your budget from the start.

It's also a good time to review your overall financial health. Paying down high-interest debt, maintaining an emergency fund, and avoiding large new purchases can help strengthen your position when it's time to apply for a mortgage.

A strong savings plan is the foundation of a successful home purchase—and the first step toward finding a home and mortgage that fit your budget and lifestyle.
 

Stage two: Find the right fit for your budget and lifestyle

Before you begin your home search, SCU mortgage professionals recommend starting with a mortgage pre-approval meeting. A pre-approval gives you a clear understanding of your budget and home affordability, helping you shop with confidence and focus on homes that align with your goals and lifestyle.

Pro Tip: Rather than asking how much you can borrow, ask how much you can comfortably afford while maintaining your current lifestyle and continuing to save for future goals. A home should support your financial well-being, not stretch it.

There are two important factors lenders look at when deciding how much you can afford to borrow. 

First, lenders review how much of your gross income (income before taxes) will go toward housing expenses. This includes your mortgage payment, property taxes, and heating costs. As a general guideline, keeping these expenses below 32% of your gross income can help ensure your home remains affordable, allowing you to enjoy homeownership comfortably while maintaining flexibility for other financial priorities and future goals.

The second factor lenders consider is your Total Debt Service (TDS) ratio, which measures the percentage of your gross income allocated to all debt obligations. This includes housing costs as well as other debts, such as car loans, lines of credit, credit cards, and student loans.

For most homeowners, keeping total debt payments at or below 40% of gross income supports long-term financial health and helps ensure there is room in the budget for everyday expenses, savings goals, and unexpected costs.

Stage three: Identify your needs vs. wants

Once you’ve received your pre-approval, it’s time to define your must-haves and nice-to-haves. Keep in mind, if everything on your list is a necessity, you may find yourself focused only on homes at the top of your budget.

Pro Tip: Prioritize the features that matter most and be flexible on those that can come later. This can help you stay focused on homes that fit both your lifestyle and budget.

Remember to consider ongoing ownership costs as well. Larger homes may come with higher utility and maintenance expenses, while condos often include monthly condo fees. Factoring these costs into your decision can help you choose a home that supports your long-term financial goals.

It's also worth looking beyond a home's current condition. A property with a few cosmetic updates or small renovation projects can be an opportunity to build sweat equity, increasing your home's value through improvements you make over time. For many homeowners, this can be a practical way to build equity while creating a space that better reflects their needs and style.

Don’t overlook homes that need a little work, purchase-plus-improvement financing may allow you to roll renovation costs into your mortgage. Ask your lender about available options and whether this solution could help you build equity while creating a home that better fits your needs.

Stage four: Planning for life after move-in

Finding your home and receiving the keys is an exciting milestone—but it’s also the beginning of your homeownership journey.

The first year in your new home is a great opportunity to compare your projected budget with your actual expenses. This can help you better understand your ongoing costs, adjust your financial plan if needed, and ensure your emergency fund continues to reflect your current lifestyle and responsibilities.

Pro Tip: Give yourself time to settle into your new budget before taking on major renovations or large purchases. The first year of homeownership provides valuable insight into your monthly expenses and can help you make informed financial decisions with confidence.

Homeownership is one of life's biggest financial decisions, and careful planning can make the process more rewarding. By starting conversations early and building a plan that reflects your goals, you can move forward with greater confidence and peace of mind.
 

Take the next step!

Saving for your first home is easier when you have a plan—and support from a team that understands the entire home-buying journey. Whether you're exploring down payment options, preparing for mortgage pre-approval, budgeting for closing costs, or looking for guidance on affordability, an SCU lending specialist can help you understand your options and create a strategy that works for you.

Ready to get started? Book a meeting with an SCU advisor to discuss your savings goals, explore home affordability, and find a mortgage solution that fits your budget, lifestyle, and long-term financial goals.