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 save money for a house while you’re paying rent each month. Several methods will help make the path towards homeownership much easier.

You need to come up with a down payment, moving costs, costs to furnish your house, and still have some money set aside for an emergency. With all that in mind, it may feel overwhelming, but with the right mindset and planning, purchasing your dream home can become a reality.

In this article we'll go over how you can save for a house while you're currently renting elsewhere.

1. Find a Way to Lower Your Rent

One of the first things you can do to begin saving money is find ways to pay less rent.

The easiest way is to downsize to a place where rent is lower. You'll have to spend some time looking for a suitable location.

You may have to move into a more rural area or away from convenience. If you have a remote job, this may not be an issue, but if you commute, then you may find that your commute becomes longers.

That said, downsizing your living arrangements can help you save hundreds per month on rent, which can be applied to your future home's down payment.

An alternative is to find a roommate who will pay half the rent and bills. If you can find multiple roommates, you can cut these costs even more.

For example, if you pay $1,500 per month in rent and $600 per month between utilities, cable, and internet and have a roommate move in, you would effectively save $750 per month on the rent and $300 on utilities, or a combined savings of $1,050 per month.

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Saving just over a thousand additional dollars per month would significantly reduce the amount of time you need for your home purchase.

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 adds up. Many unexpected expenses can prevent you from paying when the time comes.

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

Credit cards are beneficial, but they can also nurture poor spending habits if you’re not careful.

If you pay late or miss a payment, your credit score will take 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 over time. A high credit score can be helpful when the time comes to get a mortgage, as it can give you access to better loans and lower interest rates.

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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 spending.

Note all your recurring payments within a month and categorize them. You can use an app, a spreadsheet, or even pencil and paper.

By knowing your expenses and spending, you can adjust how much you spend. 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. Identifying where you can cut back will help you save money for your house while still covering required expenses like rent.

You may need to lower the budget for your favorite hobbies or cut the online shopping. You don’t have to remove the things that make you happy, but reducing how much you spend on them will allow you to reach your goal of buying a house faster.

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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.

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.

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 take on a part time or start a side hustle.

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:

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The digital world has provided us with better work opportunities that don’t need an office.

You can even find work from companies in other states. You may find that you can make more money working remotely than you could finding a job locally.

Check out job websites like FlexJobs, Indeed, and Glassdoor, and put your location in as Remote.

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5. Open a Savings Account for the Down Payment

Opening a savings account is wise when you're saving a large sum of money for something.

Consider opening a savings account and transferring money into it every time you get paid. That way you'll accumulate the money you need for the down payment on your future house in a separate account where you won't be tempted to touch it.

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By having money in a separate account, it'll be harder to immediately access it, such as with your ATM or debit card.

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.

CIT Bank offers high-yield savings, money market, CDs, and custodial accounts designed to help you maximize your personal finances.

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6. Temporarily Stop Sending Money to Your Retirement Accounts

One option you can take is to pause your contribution to your 401(k), IRA, or other retirement accounts.

Instead, place that money into a savings account as mentioned above.

The house is likely a bigger priority for you, especially if retirement is decades away. After you purchase the house, you can certainly increase your retirement contributions to as high as that makes sense for you.

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This method makes it such that you don't change how much income you have coming in each month because you're contributing to a house fund rather than a retirement fund, meaning your net paycheck remains the same.

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 online. 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.

Wrapping It Up

Saving for a down payment while renting can be a challenge, but it comes down to implementing several strategies together as they make sense to you. The more you can save per month, the sooner you can reach your goal of owning a home.

Be sure to shop around when you look for a mortgage, as different lenders offer different rates and closing costs. Check out Bankrate for more information on finding the ideal lender for you.

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