How do I even start saving for a house

When it comes to saving for a house, the most important thing is to figure out your monthly cost of housing. You don't want to overspend because if you overspend, you risk falling behind on payments and having the bank foreclose on your property. So, you want to work backwards. So, you start with how much you'll be able to afford every month. And then once you get that number, then you can figure out how much you have for a down payment. An old school rule of thumb is 20% down. I think that if you're a first-time home owner, you should put 3.5% down only because the time that it takes to save 20%, you might miss out on appreciation in your property. For example, if the property is $100,000, 3.5% is $3,500 whereas 20% down is $20,000. And that time it takes you to make an extra $17,000, which the average salary of an average American is $50,000, you might miss out on appreciation of the property. So, it depends on your situation. The most important thing in that scenario is to figure out how much you can afford to pay per month.

Andrew’s comment is spot on, but I would add one thing. When you put less than 20% down, you must pay for something called PMI (private mortgage insurance). It’s not the end of the world, but it will add a little bit to your monthly cost, so it’s something to keep in mind. In terms of saving for a down payment, you have to have a monthly budget. You can’t have a monthly savings goal if you don’t really know where your money is going every month. If you don’t have a budget, Rocket Money is a free app that really helped me. You can also just go the old-school route and use Excel or Google Sheets. But yeah, once you have a monthly budget you can set a monthly savings target. From there, you can divide the amount you need for a down payment by that savings target to see how long it’ll take to save. You’d be surprised how much help it is to have a concrete timeline and savings goal. The money will pile up faster than you might expect if you’re diligent about hitting that target!

When it comes to saving, start small. Save when you can. My mom had a coffee can that she put $1 in when she could. The first question to ask yourself is, can I find room by reducing expenses? There are places where you can get less expensive groceries. By thrifting you can find ways to reduce expenses. This works in almost any metropolitan area, including D.C. If I can't find room by reducing expenses, how do I increase my income, either at the current job, or maybe to a different job? How do I advocate for myself? Because savings isn't something you have a choice to do. It's something you have to do eventually. Personally, I didn't actually start saving a lot until I was in my 40s.

There may be specific, county-wide or citywide programs that will help you save money on specific things like buying a home. When I bought my first condo in Emeryville, in California, they had a first time buyers program which enabled me to put down 3% on the purchase. They gave me a second loan that let me do that, and it enabled me to buy my first condo. So wherever you are, there's probably programs like that that would help you save money.

Something I haven’t seen mentioned yet is that you can grow your savings as you save up. You probably shouldn’t invest any money in the stock market you plan on using in the next few years since markets go up and down at random, but you can totally buy bonds or CDs (cash deposits) that will pay a much better rate than your savings account. For example, my savings account currently pays 0.25% interest annually. That means $10,000 in savings will only become $10,025. But, I can buy a government bond (called a T-note) that pays around 4.5% right now. So, that $10,000 would be $10,450 after a year. Then, all of that compounds over time! You can make up a lot of ground just by investing those savings in shorter-term fixed-income products. Bond and CD rates change over time, but you’ll make a good chunk more than you would by just keeping the money in a savings account, which should help a lot as you save up.

Honestly, some housing markets are just crazy overpriced. A lot of the people buying up single-family homes for nearly a million dollars in DC are working for commercial investors. Some of them are landlords who already own multiple properties. The point is, they drive the market up. You may be better off looking in a lower cost-of-living area. The average home in a city like Chicago or Milwaukee or New Orleans are going to be a lot cheaper than buying in a city like DC.

If you want or need to stay in DC, though, look for a cheaper house. See if you can get a foreclosure or buy a house at auction. Or find a fixer-upper and do as much of the work as you can yourself.