Home ownership may feel out of reach when you’re a renter – especially if you’re handing over upward of 30% of your monthly income to your landlord.
No doubt, buying a home is a major financial commitment. You have to save for a down payment and then cover closing costs, moving expenses and other fees – and then handle a monthly mortgage payment. Renters can quickly become discouraged when thinking about how to save for a house to call their own.
Although mortgage rates are slowly coming down in many states, buying a home can still feel out of reach. A 2024 Citi-commissioned survey revealed that 67% of Americans believe that homeownership is an unrealistic milestone.
“With rents and home prices rising faster than wages, saving can feel like running uphill, but ownership still provides equity, stability and protection against inflation,” says Amanda Orson, founder and CEO of Galleon, a digital real estate platform. “The key is pairing realistic savings strategies with the right financing.”
So, how do you save up for a house and still afford your day-to-day expenses? We’ve created a step-by-step guide to help you get started. While you don’t have to do each step in order, the key is to stay motivated and make progress toward your goal of homeownership.
Key Takeaways:
- Cutting back, downsizing and earning additional income are all ways to save for a down payment while renting.
- If you are having trouble saving, consider researching first-time homebuying programs, such as down payment assistance grants and low-interest loans.
- You don’t always need a 20% down payment to buy a home.
Figure Out How Much Home You Can Afford
In most cases, your rent will be lower than a mortgage payment. For example, according to Rent Cafe, the average rent in the U.S. is $1,755 per month. By comparison, the monthly mortgage payment for a starter home valued at $365,000 with a 10% down payment (and a 30-year fixed mortgage at about 7% interest), is roughly $2,212.
Similar to your rent, a monthly mortgage payment will be a big piece of your budget. That’s why it’s important to understand how much home you can afford. Many financial experts recommend that your housing costs, such as mortgage payments, property taxes and home insurance, not exceed 28% of your pre-tax (gross) income.
Using a home affordability calculator can help: Simply enter your income, debts and other financial details. If you’re not sure how much homes cost in your area, try browsing houses online or on real estate apps. You can view potential homes from the comfort of your couch by plugging in your desired neighborhood’s zip code. You may not be ready to buy, but researching local real estate listings can give you an idea of what’s available and at what price points.
Decide How Much To Save For A Down Payment
Once you have figured out your home buying budget, decide how much you can comfortably save each month toward your goal. For most first-time home buyers, the largest upfront cost is the down payment. The good news? You don’t always need to put down 20% of a home’s purchase price.
According to recent data from the National Association of Realtors, in 2024, the median down payment for first-time home buyers was 9%. Some loan programs allow you to put down even less, such as an FHA loan, which requires as little as 3.5% down, or nothing at all.
For example, if you qualify for a Department of Veterans Affairs (VA) loan or a U.S. Department of Agriculture (USDA) loan, you may not need to make a down payment, but you will pay fees. VA loans include a one-time funding fee that ranges from 1.25% to 3.3% of the total loan. USDA loans require a 1% upfront guarantee fee, plus an annual fee equal to 0.35% of the loan amount.
Even some conventional loans allow you to put down as little as 3%; however, if you want to skip paying private mortgage insurance, you’ll need to put down the full 20%.
Here’s how much you’d need to save for a down payment on a $420,000 home:
- 20% down: $84,000
- 9% down: $37,800
- 3% down: $12,600
Other financial factors include closing costs (typically 3% to 6% of the home’s purchase price) and any moving expenses you may incur. According to HomeAdvisor, the average cost for professional movers is $1,710, with local moves ranging from $882 to $2,566.
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Give Your Budget A Makeover
When saving for a down payment, you may need to create a new household budget. Start by tracking your expenses. Look for opportunities to save more and pay down debt, if you have any, starting with high-interest credit cards.
Try The 50/30/20 Rule
One budgeting hack for savings is the 50/30/20 rule. Use it for your monthly net (after-tax) income.
- 50% goes to rent, utilities, gas, minimum debt payments and groceries (needs)
- 30% goes to dining out, entertainment and hobbies (wants)
- 20% goes to savings, retirement fund, investments and large debt payments
Remember, you can always allocate more money toward your down payment fund from your “wants” category to bump up your savings. Cutting back on dining, entertainment and other activities can help you save faster for a home.
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Pay Attention To Your Debt-To-Income Ratio And Credit Score
When it’s time to take out a home loan, mortgage lenders typically want to see a debt-to-income ratio (DTI) below 35% or 36%; by reducing your debt, you may be able to qualify more easily for a home loan. (Your DTI compares the amount of debt you owe to your gross monthly income.) If your DTI is too high, you may not be eligible for the best interest rates or for a home loan at all.
In addition, home buyers usually need a minimum credit score of 620 for conventional mortgage approval. In some cases, you may qualify with a lower credit score, but the higher your score, the better your loan’s interest rate.
Automate Your Savings
“My strategy for savings is out of sight, out of mind,” says Eli Harris, a licensed real estate agent in Mansfield, Massachusetts. “If your employer or income source allows multiple accounts, open an account at a separate bank. Don’t get an ATM card or checks. If you need to access the money, you’ll have to do it during business hours and make the effort to go.”
To automate your down payment savings, use your employer’s direct deposit option to send a portion of your paycheck to savings; if you’re self-employed, set up an automatic transfer from your checking account.
Here are three good savings options that offer higher returns* than a standard bank account. However, it is important to note that your returns will depend on the Federal Funds Rate, which impacts how much banks are willing to pay on deposits. This means your actual rates will vary based on market conditions and each institution’s offerings.
- High-yield savings account: Interest rates are around 4% APY (or higher) on high-yield savings accounts. Rates will fluctuate with these accounts as banks respond to changes in the Federal Funds Rate.
- Money market account: You could earn up to 5% APY or more on your savings.
- Certificate of deposit (CD): Up to 4.5% APY depending on the length of the CD and other factors. The length of the CD is important because longer terms can lock in higher rates when the Federal Funds Rate rises.
* Rates expressed here are based on August 2025 APY data
Downsize Your Current Rental
If you’re serious about saving for a down payment on a home, you may need to make short-term lifestyle sacrifices – starting with your current living space. Consider downsizing to a smaller or more affordable apartment.
If you have the space in your rental and your landlord allows it, you could also consider getting a roommate to split the rent and utilities. By doing so, you could reduce your monthly expenses, allowing you to put more money into your home buying fund.
While not for everyone, moving in with your parents or other family members for a set period of time – especially if you don’t have to pay them rent or can pay less than you were previously spending – can be a solid option.
“Getting creative with your current housing costs, like taking on a roommate or even moving in with family temporarily, can dramatically accelerate your savings rate,” says Orson.
Save All Windfalls
If you receive a windfall in cash, like an inheritance, working bonus, lottery winnings or a tax refund, deposit some or all of it into your home savings fund to supercharge your down payment account. According to the IRS, the average tax refund in 2025 was $3,116 – a significant amount of money.
Consider Making Extra Income
Taking on a side job or finding creative ways to earn more income can go a long way toward padding your down payment fund. Think about the best ways to apply your skills and hobbies: Teachers could consider tutoring work. If you’re a dog lover, you could try dog walking or pet sitting. If you don’t have the time or energy to work a full second shift, you could try selling your unworn clothing on consignment or peddling your artwork or crafts on Etsy. When you’re saving for a home, every dollar counts.
Take The First Step To Buying A Home
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Negotiate With Your Landlord
In some (but certainly not all) cases, you may be able to negotiate a lower rent with your landlord in exchange for helping with maintenance projects around the property. You could also offer to upgrade your apartment using sweat equity – say, painting the apartment or sanding the floors – in exchange for lower rent. Keep in mind that this may work best if your home is owned by an individual rather than a real estate investment group.
Research Affordable Mortgages And Housing Grants
First-time home buyers may qualify for a variety of federal and state home ownership grants, low-interest home loans or down payment assistance – all designed to help low- to moderate-income individuals and families afford their first home. To qualify, you must meet specific eligibility requirements, such as occupying the house for a specified number of years; in some cases, you’ll also be required to complete a homeowner’s education course.
If you qualify for one of these first-time home buyer assistance programs, it could significantly reduce what you need to save for a down payment. “While not a substitute for down-payment savings, they certainly can help make home ownership a little more possible for those who think it’s impossible,” says Harris.
FAQ
If you are considering a rent-to-own situation, it is a good idea to speak to a real estate attorney before you sign a lease or contract. Rent-to-own contracts can be risky in some circumstances.
The Bottom Line: Start Saving For A House Today
Saving up for a down payment while you are renting takes time and careful planning. Lowering your debt, opening a high-yield savings account, investigating first-time home ownership programs and even downsizing your rental are all ways to save money and boost your chances of buying your first home.
Ben Shapiro
Ben Shapiro is an award-winning financial analyst with nearly a decade of experience working in corporate finance in big banks, small-to-medium-size businesses, and mortgage finance. His expertise includes strategic application of macroeconomic analysis, financial data analysis, financial forecasting and strategic scenario planning. For the past four years, he has focused on the mortgage industry, applying economics to forecasting and strategic decision-making at Quicken Loans. Ben earned a bachelor’s degree in business with a minor in economics from California State University, Northridge, graduating cum laude and with honors. He also served as an officer in an allied military for five years, responsible for the welfare of 300 soldiers and eight direct reports before age 25.
