7 Ways to Save for a House While Renting

a nice sized house that was saved for while the owner was renting

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It can be a challenge to try and save money while you’re paying rent each month. It’s not impossible, though, and several methods can help make the path towards homeownership much easier. From simple changes to measured strategies, you can accelerate your journey. If you’re wondering how to save for a house while renting, combine some of the strategies below.

1. Find a Way to Lower Your Rent

One of the first things you can do to begin saving money is to reduce the amount you put towards your rent each month. There are many ways you can approach this.

The easiest one is to downsize to a place with a lower rent. The only challenge with this is that you’ll have to spend some time and money looking for a good location. Not only will you need a new place, but the financial benefits must justify such a drastic change.

If you find that you have a lot of room to work with, then you might be able to live in a smaller space.

It’s a sacrifice, but one that can quickly accelerate your savings. Getting a place with lower rent can save you hundreds or thousands each month, depending on your location, and certainly save thousands or more per year.

The other option is to look for a location outside the city or state, but this has drawbacks, too. You’ll be uprooting your day-to-day life as a way to save money. Of course, if you work remotely, this might work out quite well.

An alternative is to find someone who can share the rent with you. Searching for a roommate can effectively halve the costs of your current rent. If you can find multiple roommates, you can cut these costs even more.

It does come at the price of adjusting your lifestyle to fit a new person in your life, though, but it may be worth it if your goal is to save up for an eventual permanent residence.

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2. Pay Down Credit Card Debt

Credit card debt is one of the silent killers of income. It’s easy to pay for something in advance with the hopes of being able to cover it during payday. However, debt can add up. Many unforeseen events can prevent you from paying when the time comes.

When that happens, fees and interest begin adding up. Those costs can compound, spiraling you into deeper debt.

Credit cards are beneficial, but they can also nurture poor spending habits if you’re not careful. If you cannot pay diligently, then your credit score takes a hit. A lower credit score might hurt your ability to get a mortgage, or it may make you pay more in interest when quoted for a mortgage.

Prioritize paying off credit card debt. That way, you can begin improving your credit score slowly. A high credit score can be helpful when the time comes for needing a down payment on your house. It can give you access to better loans, plans, and more opportunities.

The 28/36 rule states that your housing expenses should be no greater than 28% of your gross monthly income and that your total debt payments, housing included, should be no greater than 36% of your income. With this in mind, the less debt you have and the more money you make, the more house you can afford.

3. Lower Your Expenses

Even if you are spending money wisely, there is always a way to lower expenses. The first thing you need to do is track your budget. Note all your recurring payments within a month and categorize them. Some people like using apps or envelopes, though any method will do as long as you’re comfortable with it.

By knowing your expenses and spending, you can adjust. You can budget better and see where you might be overspending. Maybe you’re going out more often than you like, or you’re spending too much on luxury items. You can alleviate some of the pressure on your income and redirect it to saving for that new house.

It may mean sacrificing some of the things you’re enjoying currently. You may need to lower the budget for your hobby or eat out less. You don’t have to remove the things that bring enjoyment, but reducing their frequency or spending can add up.

It also means being diligent when looking for opportunities to save. Don’t hesitate to seek out discounted items or use coupons. Try to look for promotions that can lower your expenses and give you more breathing room. In that way, even emergency spending won’t catch you off guard.

There’s always a more affordable alternative to what you’re using right now. You may need to experiment to reach that point, but all of it will help you in the long run.

Speaking of lowering your expenses, the app Trim can help. Trim helps by negotiating your cable, internet, and phone bill, as well as helping you cancel unused subscriptions and remove bank fees. Trim is “mostly free” in that you pay Trim a small portion of the money you save.

In general, lowering your cost of living is a key way to save for a house while renting.

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4. Increase Your Income

If you’re committed to finding ways to save more for a future house while you're renting, then it might mean working more. Spend extra hours at your job or take overtime opportunities when possible.

If you’re not comfortable with the idea of working more at your current job, then look for other opportunities. You can work extra hours at other places, and the experience can add to your resume. Better yet, try to find a job that doesn’t need you to make a fixed time commitment. For example, working as a freelancer does not take 9 to 5 as most jobs do. Here are some jobs that you can consider:

The digital world has provided us with better work opportunities that don’t need an office. Not only that, the events of the past two years have made remote work more of a norm. You can even find work from companies in other countries. Some of them pay better compared to rates you’re used to in your city.

All you need to do is to start searching. If you’re unsure of that job opportunity, try it out first and see if it’s something that can help you save for a house.

5. Open a Savings Account for the Down Payment

When you begin saving a lot of money, it can be easy to spend it. You may think that it’s only a little compared to your balance, but it’s hurting your chances of acquiring your home. One of the best things to do is to open a separate savings account. That account only should only accumulate the down payment for your future house, and should only be withdrawn from then.

By having it in a separate account, you’ll make it harder for you to withdraw money from it. You may even forget that it exists. You can have money automatically transferred to that account every month. A high yield savings account can also provide you with some extra cash if you plan on keeping it there for a long time.

One such bank to have an online savings account for this purpose is CIT Bank.

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6. Temporary Stop Sending Money to Your Retirement Accounts

One option you can take is to pause your contribution to your IRA or other retirement accounts. Instead, you can use the money meant for it and direct it to home savings. The house is a bigger priority, especially if retirement is decades away. While it may affect your earnings into retirement, you can always make adjustments after you complete your home purchase.

It is a way to save for a house without affecting your cash flow. You can even take it further by adding additional money through other strategies.

You can also apply the same idea with other accounts you may have. Are you regularly contributing to long-term investments? Putting it into a house may be the more immediate goal. Instead of dividing your money to pay for multiple things, pay for one thing first so you can get it faster.

7. Use Homeowners Assistance Programs Where Possible

A HAP is a program dedicated to helping those who want to enter homeownership. For example, if you don’t have enough funds to sustain or pay off a current mortgage, the program can help you. A HAP is for those who already have a home that they’re paying for or selling. It’s not uncommon to find programs that help people who want to enter into ownership.

The best way to check is to look at the eligibility and availability of programs at the HAP website. These can change, including requirements and application periods. This is because funding for it can change from time to time. One of the most common beneficiaries of these programs is those in public service or the military.

You don’t have to limit yourselves to Homeowner’s Assistance Programs either. Many private and government programs can help fund your new home faster than you expect. They may come with certain conditions, so read the fine print and don’t rush it. You don’t want to end up in a deal that you’ll regret, especially since homes are a lifetime commitment for many people.

Wrapping It Up

A common mistake is to wait for a better position before even considering a saving plan. The truth is that even with little money, you can make a long-term impact on your savings. Make these adjustments and begin seeing your funds compound. It’s all about consistency and dedication to your goal.

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