Key takeaways

  • Saving for a home down payment while paying rent and other bills is challenging.
  • High home prices and high mortgage rates exacerbate the problem.
  • There are ways to make saving easier, though, including keeping your funds in a high-yield account, cutting back where you can and looking into assistance programs for first-time homebuyers.

For many renters, saving up for a down payment on a home is a challenge. Just paying rent can be hard enough: According to Zillow’s monthly Observed Rent Index, the typical U.S. rent in October 2023 was $2,011, a 3.2 percent year-over-year increase. And home prices keep rising: The National Association of Realtors reports that the median existing-home price for the same month was a whopping $394,300. Add in mortgage rates at 20-year highs, and buying your first home can feel like an impossible goal.

Homeownership “has always been the American Dream, but it kind of feels out of reach for a lot of people,” says Jennifer Fraser, director of stakeholder engagement and contact center operations for GreenPath Financial Wellness in Farmington Hills, Michigan.

That doesn’t mean you should despair, though. There are still ways to save money or get assistance to put toward a down payment. Let’s explore how to save up for a house while you’re renting.

How much down payment do you need?

Your first step is to determine how much house you can afford, which will help you estimate how much you need for a down payment. You can use Bankrate’s affordability calculator to help you figure out a realistic budget.

The down payment you’ll need depends on the kind of loan you’re seeking and the price of the home you’re hoping to buy. Consider whether you want to avoid the additional cost of private mortgage insurance — if so, you’ll need to put down 20 percent of the home’s price. On a median-priced home of nearly $400,000, that is a hefty sum: $80,000.

Different types of mortgages have different down payment requirements, though, and many require a much lower percentage. Qualified borrowers may be able to put down just 3 percent, which means you may be able to save up over a shorter timeframe. Keep in mind, however, that the more you are able to put down upfront, the less you’ll have to borrow.

If you’re not sure which mortgage is right for you, talking to a loan officer can help you narrow down your options, says Juan Carlos Cruz, founder of Britewater Financial Group in Brooklyn, New York.

Other costs to consider

Aside from the amount of your down payment, you’ll need to take into account these additional costs as well:

  • Closing costs: Every real estate purchase comes with some closing costs. For homebuyers, these expenses will include fees related to the property and the mortgage loan, such as title-related fees and the cost of a home appraisal and inspection. According to ClosingCorp, the national average for single-family-home closing costs in 2021 was $6,905 (including transfer taxes).
  • Property taxes and homeowners insurance: Both will be regular homeownership costs that you’ll want to budget for. The costs will vary greatly depending on your location.
  • Moving costs: The cost of moving can sneak up on you. Hiring a professional for a local move runs about $1,700 on average, HomeAdvisor reports. Long-distance moves will cost more.
  • Repairs and upkeep: Once you move into your new home, you will also have to take care of regular maintenance and address any needed repairs, so be sure to have some extra funds stashed away. And remember that if you’re moving into a larger space, you might need to spend some money on additional furnishings, as well.

How to save for a house while renting

1. Open a down payment savings account

Once you have a down payment amount in mind, open a savings account to “help you keep track of how much you’re saving and your progress,” Cruz says. Otherwise, you might be tempted to dip into your down payment fund to pay for recurring, or even unnecessary, expenses.

Keep in mind the type of account you’re putting your money in. Many online banks offer higher interest rates on savings accounts than brick-and-mortar banks do, so your savings may have more opportunity to grow with an online account. Consider a high-yield savings account too.

To start building your savings, Michele Hammond, a partner at Quick Close Capital in New York, recommends having a portion of your pay automatically deposited into the account, or setting up an automatic transfer from your checking to your savings account. You can also use an app to “round up purchases to the nearest dollar and put the change into a linked savings account, so you can save without it being a heavy burden,” she says.

If you recently got a pay raise, tax refund, work bonus or cash gift, stash it in your savings account, Fraser says. This can be a smart way to boost your savings from the outset.

2. Look at where you can cut back

It’s also important to examine your discretionary spending and see if you can make cuts, such as Netflix or morning lattes, says Miriam Mitchell, chief lending officer at Addition Financial Credit Union in Lake Mary, Florida. It’s likely “you can find a lot of savings in there to build a down payment fund,” she says.

Consider shopping for cheaper auto insurance or a less expensive cell phone plan, as well. You may find you’re able to cut costs on these seemingly “fixed” bills, and can put the difference toward savings.

3. Address your debt

Take a look at your debt to find areas to cut costs, too. If you have a balance on a high-interest rate credit card, consider doing a balance transfer, Mitchell says. Many cards offer zero-percent interest on balance transfers for a set period of time, such as 12 or 18 months, although they typically charge a fee between 3 percent and 5 percent of the amount transferred.

Similarly, avoid adding more debt to your name. To qualify for a mortgage, you’ll need to meet the lender’s debt-to-income (DTI) ratio requirement, and the less debt you have relative to your income, the better. You can use Bankrate’s DTI ratio calculator to estimate where you stand. Generally, you’ll want to keep your DTI ratio below 43 percent.

4. Go beyond your day job

If you don’t have much wiggle room in your budget as a renter, you can try bolstering your savings by earning some extra money. Check out gig economy jobs that are in demand, such as delivering food for GrubHub or DoorDash, Mitchell suggests.

Look into what you own that you might be able to sell, too. “Everybody’s selling stuff on local websites,” Fraser says. “Little side hustles are a fabulous way to bring in a bit of extra cash.”

5. Make bigger changes

If you’re eager to save up for a home, and fast, you may want to take more sweeping measures. You might consider getting a roommate, for example, to help split the rent and other expenses, or even moving into a smaller, less expensive rental to save money each month.

If a move is out of the question, you might even try renegotiating your lease with your landlord. This can work well if you’ve been a great tenant or can guarantee you’ll be in the rental for a longer period of time. In some larger cities, rents are actually decreasing: Zillow’s Observed Rent Index for October named Austin, San Francisco and Portland as cities where rent has fallen in the past year. Landlords may be more willing to negotiate now if it means they can lock you in as a tenant.

6. Apply for assistance programs

Many mortgage lenders have first-time homebuyer loans and programs that can help cover a portion of your down payment. Such programs might require you to occupy your home for a certain period of time to avoid having to repay the money, Cruz notes. Other forms of assistance, such as grants, may require you to complete a homebuyer education course before receiving the funds.

Your field of work might be in your favor, too. Some programs provide assistance to homebuyers in certain occupations, such as teachers or first responders. “A lot of lenders are looking to reach out to underserved and diverse communities to improve opportunities for homeownership,” says Fraser. If you’re in one of these roles, there may be assistance available specifically for you. Fraser recommends checking out, which can help you find assistance programs in your area.

Bottom line

Setting aside savings toward a down payment for a home can feel like a rite of passage, and a difficult one at that. Although saving for a home while renting is challenging, the suggestions above could help put you closer to your goal.