How to Save a Down Payment While Renting

It might feel impossible to save a down payment while renting. After all, rent is expensive! And it’s not getting any cheaper. The national median rent for a two-bedroom apartment was $1,358 in the summer of 2022.¹ So how in the world are you supposed to save a down payment big enough to buy a house when more of your money keeps going toward rent every year?

Don’t worry. It is possible and you can do it. We’ll show you how.

9 Tips on How to Save a Down Payment While Renting

Here’s a quick rundown of some of the best ways to save for a down payment while renting:

1. Follow a budget.
2. Pay off debt.
3. Get a roommate.
4. Move to a cheaper apartment.
5. Cut unnecessary spending.
6. Sell stuff.
7. Start a side hustle.
8. Save bonuses and raises.
9. Avoid rent-to-own.

Now let’s dig deeper into each of these.

Budgeting shows your money who’s in charge (that’s you). It gives you the power to tell your money where to go—instead of you wondering where it went. Budgeting is how you make any money goals happen—like saving for a down payment.

See how much house you can afford with our free mortgage calculator!

Here’s how to make a budget that really works:

• Write down your monthly income.
• List your monthly expenses—including your monthly down payment savings goal.
• Subtract expenses from income.
• Track your spending (all month long).
• Make a new budget before the month begins.

If you’re new to budgeting, it might take a few months to get it right. But hang in there. Soon, you’ll be a budgeting pro. And you’ll be amazed at how much you can stash away each month toward your down payment savings goal.

Get this: On average, 30% of Americans' monthly income goes toward paying off nonmortgage debt (like credit card bills, car loans and education loans).² That’s nearly a third of your income wasted paying for stuff from the past instead of going toward your future home!

Let’s say your monthly take-home pay is $5,000. According to the statistic, debt would swallow up $1,500 of that each month ($5,000 x 30%). Instead of wasting your money, what if you got super intense and paid off all your debt fast. Then you could use that $1,500 toward saving for your down payment each month—which adds up to $18,000 in just one year!

Trust us, you don’t want to buy a house when you’re in debt. Adding a mortgage on top of debt and homeownership costs will make your life a living nightmare. Instead, be patient and keep renting until you’ve paid off 100% of your debt and saved a full emergency fund (3–6 months of living expenses). Only then will you be in good shape to save for your home down payment.

Let’s say you’re single and renting an apartment while saving up to buy a house. It’s likely a two-bedroom apartment isn’t much more expensive than your one-bedroom apartment. For example, remember that the national median rent for a two-bedroom apartment was at $1,358 in the summer of 2022. Meanwhile, a one-bedroom apartment was at $1,185.³ That’s not even a $200 difference! So why not upgrade to a two-bedroom apartment, get a roommate, and split your rent costs in half?

Or let’s say you’re married and renting a townhouse with your spouse. You could invite a close relative or friend (who both you and your spouse get along with) to live in your guest room for a season.

For either of these scenarios, let’s suppose you were paying $1,500 for rent plus utilities—without the extra roommate. But after adding the roommate, you cut those expenses in half. That frees up an extra $750 per month—or $9,000 per year—to add toward your down payment savings!

Moving is never fun—especially if you move away from a cool area to . . . well, one that’s not. But what if finding cheaper rent could add thousands of dollars to your down payment savings in just one year?

Take our imaginary bachelor-friend Joel, for example. He currently lives in Williamson County, Tennessee. He’s living his best life smack dab between the live-music scene of downtown Nashville and the scenic small-town vibes of Franklin. But he wants to buy a house—and it’s hard for him to save while paying the higher rent prices that come with living in such a popular area.

So Joel packs up his two-bedroom Franklin apartment and moves further south to the less-crowded, more rural area of Maury County. Joel goes from paying a median rent of $1,958 in Williamson County to paying $1,244 in Maury County.⁴ He can now save more than $700 a month—or around $8,500 per year—toward his down payment goal!

Sure, Joel has to drive a bit further to visit his favorite Nashville hangout spots. But he also discovers some things he likes doing in the smaller towns near his new apartment. Who knows, maybe he’ll meet a lucky lady in his new area, get hitched, and buy that house sooner than he thought!

If you’re like Joel and are renting in a popular (aka expensive) neighborhood, consider the worthy sacrifice of leaving the razzle-dazzle to live in an area with cheaper rent. Then, put the extra cash you pocket each month toward your down payment savings and watch it explode with growth!

Pro tip: Never rent a place that costs you more than 25% of your monthly take-home pay. If you’re paying more than that, you’re renting more than you can afford.

Another way to boost your down payment savings is to cut back on things you don’t really need. Sure, it can be painful to skip certain splurges. But remember, it’s just temporary. After you’ve reached your down payment goal, you can add those things back into your budget.

Here are some ideas on how to cut spending:

• Eat out less and buy generic-brand groceries.
• Replace vacations with staycations.
• Avoid buying new products and shop for used and reusable ones.
• Suspend video streaming subscriptions and borrow videos from the library.
• Trade your gym membership for free at-home workouts on YouTube.

No doubt there’s a bunch of junk you don’t use anymore that’s lying around your apartment or rental home—so sell it! If you live in a high-traffic area, you could have a garage sale. Or you could sell online using platforms like Facebook Marketplace, Craigslist or eBay. 

Here are some ideas on what to sell:

• Clothes
• Jewelry
• Books
• Blu-ray discs, DVDs and CDs
• Toys and games
• Home decor
• Furniture

If you really want to hit the gas on your down payment savings, pick up another job on the side. It doesn’t have to be anything fancy. You won’t be working there forever. So choose something simple you won’t totally hate doing after your day job.

Here are some side hustle ideas:

• Drive for Uber or Lyft
• Babysit
• Dog walk or pet sit
• Clean houses
• Sell products on Etsy
• Become a tutor
• Give music lessons
• Do freelance work online
• Wash and detail cars
• Mow lawns or do yard work
• Shovel driveways

Do you have opportunities for bonuses at your job? Maybe you’re in a role where you can increase your commissions the harder you work. Or you might be due for a raise. Whatever your job situation, another great way to save for a house while renting is to dedicate any extra money you earn at work toward your down payment goal.

Before we wrap up, we have to shift gears here to warn you about rent-to-own homes. You might be tempted to choose this option, but first make sure you know how these deals can really screw you over.

A rent-to-own home is a house you rent for a few years before you buy it. The point here is to lock in a house you want even if you can’t afford it yet. The problem with rent-to-own is that it’s more expensive than renting while saving separately for a down payment.

For example, with rent-to-own, you’ll pay a nonrefundable fee called option money. That’s the fee that gives you the option to purchase the house later. On top of that, your rent will likely be higher because some of it may go toward your future purchase as part of a built-in down payment.

You can start to see why this is a ridiculous deal. Why fork over a nonrefundable fee and set up a forced down payment savings agreement instead of saving the money by yourself? What if you decide you don’t want to buy that particular house after the rental period is over? All the extra money you paid for the rent-to-own agreement would go bye-bye. Bad idea!

Instead, stick to a traditional rental agreement, skip rent-to-own fees, and save up your own down payment. You’ll be glad you did.

How Much Should I Have Saved Before Getting a House?

Wondering how much is a good down payment? Ideally, you’d put down at least 20% of the home price to avoid private mortgage insurance (PMI). PMI is a fee you pay that protects your lender (not you) if you stop making mortgage payments. For a $200,000 house, a 20% down payment is $40,000 ($200,000 x 20%).

For first-time home buyers, a smaller down payment like 5–10% is okay too. But then you will have to pay PMI. Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost). And stay away from risky loans like FHA, VA and USDA.

Use our mortgage calculator to get an idea of what your monthly payment could look like by adjusting the home price, down payment, interest rate and more so you can find out which combinations best fit your budget.

Work With a Mortgage Expert You Can Trust

To learn more about how your down payment will impact your mortgage, talk to a home loan expert you can trust. Our friends at Churchill Mortgage have earned the right to be called RamseyTrusted because they have the heart of a teacher. They actually care about helping you stick to your budget and getting you a mortgage you can pay off fast.

Connect with a trusted mortgage provider!

Find a Hard-Working Real Estate Agent

So, what happens if you finish saving your down payment, but can’t find a house that fits your budget? That’s when you want to work with an experienced real estate agent. The RamseyTrusted agents in our Endorsed Local Providers (ELP) program take the time to understand your list of must-haves and your financial situation. They’re workhorses who will hunt high and low to find the right house for you.

Find the best real estate agent near you!

Frequently Asked Questions

How Do I Budget for a House?

The first step to budgeting for a house is to know how much down payment you need. Ideally, you’ll want to save a down payment of at least 20%. For first-time home buyers, a smaller down payment like 5–10% is okay too—but then you’ll have to pay PMI. Whatever you do, never buy a house with a monthly payment that’s more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage (which has the overall lowest total cost). And stay away from expensive loans like FHA, VA and USDA.

After you’ve set your savings goal, here are some tips on how to save for a house: Pay off all your debt, tighten your spending, hold off on your retirement savings (temporarily), start a side job, and sell stuff you don’t need.

Let’s say you want to buy a $200,000 house. Your down payment savings goal is $40,000 (or 20% of the home price). To budget for this house in two years, you’d need to set aside $1,700 each month ($40,000 / 2 years / 12 months = $1,700).

Where Should I Stash My Down Payment?

You can stash your down payment in a simple money market account or high-yield savings account. You won’t make tons on interest, but you won’t lose money either. Keep in mind: Saving a down payment is not the same as investing for retirement—you want to keep your savings liquid and in a place that’s easy to access.

When Should I Start Saving for a House?

As soon as you’re debt-free with a full emergency fund of 3–6 months’ worth of your typical expenses, you’re ready to start saving for a house!

How Can I Save for a House Quickly?

If you want to save for a house fast, you need to be debt-free and have an emergency fund of 3–6 months of expenses saved. With your income freed from debt payments and an emergency fund to protect you from life’s unexpected surprises, you can save for a house much faster. Here are some other ideas to help you save money fast.

I Can’t Afford a House—What Do I Do?

Trying to buy a house when home prices are high can be frustrating. But with the right plan, you can do it. Set a down payment goal and save like crazy for a year or two. Try these smart ways to save for a home down payment.

Once you have a strong down payment saved up, work with an experienced real estate agent who knows your area. The best agents will work hard to find you a house that fits your budget.