Find a script. To really save money on the production of your movie, write the script yourself. If you would rather invent your story as you go along and allow actors to improvise their lines, even writing a simple synopsis of the story is acceptable. Keep your budget down by not having too many locations (travel time costs), too many characters (if you're paying actors) and or too many night scenes (lighting adds to the cost of the film).
Purchase a cheap digital recorder. Using a digital camera means you won't have to buy film, which will keep the cost of your movie down. The camera you choose will depend largely upon what you want to spend, but since you want to make a cheap movie, cost is an issue. Look for a digital recorder that fits your budget but provides a degree of film quality. Just because you're making a cheap movie doesn't mean it needs to look cheap. Look for portability and the memory capability you can afford. Canon, Sony and Samsung all make reasonably priced digital camcorders suitable for making a cheap horror movie at home.
Film your movie in locations you have access to at no charge. Discuss each scene with your actors before the scene is shot. If there is no script, let the actors know the purpose of the scene and how you want the scene played (or acted). To keep the film low-budget, you are probably directing the film yourself. The more time you spend on shooting the film, the more it will cost you, unless you're not paying your actors.
Employ family and friends for making of your movie. Don't use family and friends who can't act just to save money, but if you have talented family members and friends who'll work for free, there's nothing wrong with using them.
Keep special effects to a minimum in your story. Confine the effects to those you can create simply, using inexpensive props and makeup. You can buy Halloween makeup, fake blood and other props cheaply, especially after Halloween, and using these items for the horrific effects in your film will keep the costs down. You can use creative camera angles and minimal lighting to increase the realism of the props.
Edit the film yourself. There's low-cost and even free software available that will allow you to cut and splice the scenes you shoot into a cohesive movie and then burn it to DVD (see Resources). Using this software and doing the editing yourself is another way to keep the cost of your movie down.