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How to Save for a House While Renting

Couple looking at their dream house

As the years go on, houses become more and more expensive. It’s gotten to the point that becoming a homeowner seems like a dream that’s entirely out of reach for some people. But that is not the case—anyone can be a homeowner with the right knowledge and discipline.

But what if you’re still spending money on rent? How can you save money for a house when so much of your income goes toward keeping a roof over your head? It’s entirely possible, you just have to know how to save.

Let’s learn how to save for a house while renting. But first, we should go over some home-buying basics—starting with how much you need to put on your down payment.

How Much of a Down Payment Do You Need?

There’s no real standard for how much you need to put down for a house.

For a long time, the common consensus was that your down payment should be at least 20% of the total cost of the house. So, if you wanted to buy a house that’s $200,000, you’d need to make a down payment of $40,000. That’s a pretty large chunk of change and may not be something you could afford for years.

Fortunately, that “magic” 20% number is loosening its grip on homebuyers. In 2019, the average down payment on a house or condo for first-time buyers was 6%. When looking at all homebuyers, that average only increased to 12%.

Some government-sponsored loan programs even allow you to put zero money down on your house; such is the case with VA and USDA loans.

Is It Possible to Save for a House While Renting?Married couple budgeting for a home

Yes, it’s possible to save for a house while renting—millions of Americans manage to do it, so why can’t you? It will take some level of financial discipline, but we hope this article will be your guide to establishing your savings plan.

How Many Years of Saving Will It Take?

According to CNBC, it takes an average of six and a half years to save for a mortgage down payment. However, that applies to down payments of 20%—with a lower down payment, you could save enough money much sooner. How long it takes entirely depends on two things:

  • How much money you want to spend on a down payment
  • How much money you’re willing and able to save every month

Empower your budgeting journey now. Apply for a loan to gain the ability to manage your money.

How to Save While Renting

As we already mentioned, it will take some serious discipline and budgeting to save up for a house. But with the right plan, it shouldn’t be too difficult. So let’s get into some budgeting basics and other tips to find out how to save money for a house while renting.

1) Establish Your Target House Price

Before you get too excited about saving, you need to establish an end goal—what price range are you shopping for, and how much are you willing to put for a down payment?

Once you have that price range, then you have a target to aim for. Otherwise, you’ll just be saving money with no purpose. And while it’s always good to have some money saved up, having a goal will keep you from accidentally saving too much or too little.

2) Learn Budgeting Basics

Many people see budgeting as limiting—you can’t spend money on what you want because you “have” to save it or put it toward other expenses. But in reality, budgeting allows you to take full control of your finances.

By budgeting your monthly earnings, you know exactly what you need to save and how much you’ll have left over to spend however you want. You also won’t ever feel trapped when you overspend one month and can’t contribute what you wanted to toward your future home.

Now, there are five things you should consider when preparing to budget:

  1. Goals (in this case, saving for a house)
  2. Current income
  3. Spending habits
  4. Credit card usage
  5. Savings plans

These variables will help you become aware of how you currently use your money and inform how much you should realistically be able to save.

Now that we’ve established the necessity for budgeting and its basics let’s talk about choosing a plan.

Empower your budgeting journey now. Apply for a loan to gain the ability to manage your money.

Choose a Budgeting Plan

There are a few different approaches you can take to budgeting:

  • The 50/30/20 Rule: This is one of the most popular ways to budget. The numbers represent percentages of your monthly earnings and how you should spend them—50% on needs (rent, food, insurance payments, etc.), 30% on wants (luxury items, clothes, games, streaming services, etc.), and 20% to your savings account. This ensures that you put at least one-fifth of your wages toward your future home. And, if you ever don’t spend the whole 30% on your “wants,” you can put any excess into your savings.
  • Reverse Budgeting: In reverse budgeting, you set up dollar amount savings goals. For example, after setting aside your rent money, you might commit to putting $400 toward your new house fund every month, $100 to a general savings fund, and $25 toward a larger luxury item (like a TV or new computer). Then whatever is left can be spent however you like. You won’t feel bad about overspending because you’ve already put everything you intended into a savings account.
  • Zero-Based Budgeting: Zero-based budgeting makes you account for every cent of your monthly earnings; if you make $3,187 a month, you budget for $3,187. This is one of the most intensive forms of budgeting, forcing you to divide up exactly how you’re going to spend and save your money.

Track Your SavingsWoman choosing a budgeting plan

Another part of budgeting is ensuring you are on track. It’s incredibly easy to just forget to put money into your savings account for one month. So, check your account balances at the end of every month. This will help you confirm whether you’ve contributed toward your savings plan at the rate you originally planned on.

If it looks like you’re behind on your savings, make adjustments in the months ahead to help you catch up. Or, if you’ve somehow saved more than you anticipated, you can rest easy knowing you are well on your way to a new house.

3) Handle Current Debts

When you apply for a home loan, the lender will look at your credit score and current debts to determine if you qualify for their loan. So, to improve your chances of getting that loan and making your savings worth it, you need to start managing your current debts.

Debt-to-Income Ratio

Of course, for many people, eliminating debts simply isn’t feasible. But here’s the good news: Many debtors will simply look at your debt-to-income ratio (DTI) to determine mortgage eligibility. This ratio measures your ability to pay off monthly debt payments.

You can calculate DTI with the following formula:

(Monthly minimum debt payments / Monthly pre-tax income) x 100 = DTI percentage

Try to aim for a DTI of 50% or less; that range will increase your chances of qualifying for a mortgage loan.

4) Reduce Your Rent

Saving for a house will be a lot easier if you aren’t spending most of your money on your rent. So, if you can, you should consider changing your living situation to accommodate a cheaper monthly rent. Here are some ways you might consider accomplishing that.

Get a Roommate

If you have an extra room you use for storage, office space, or as a guest room, you may want to clear out that furniture and put the room up for rent.

Having a roommate allows you to share the expense of rent and utilities, therefore decreasing that burden and letting you put more money toward your down payment savings. Plus, depending on the roommate, you may be able to share other expenses, such as food and cleaning products.

Not sure where to find a roommate? There are a few places you should look:

  • Ask friends and family if they’re looking for a new place to stay.
  • Ask coworkers if they know anyone trying to move to your area.
  • Put out a listing on Facebook, Zillow, or

Make sure to screen people you are unfamiliar with—while roommates can reduce costs, getting the wrong roommate may turn out to be a financial burden. This is the case with roommates who are unsanitary or who don’t make their rent payments.

Move to a Cheaper Place

Many people reading this may be living in cities where rent is notoriously more expensive. So how can you save money when the rent is so high? It’s possible but much more difficult. You can still set money aside, but it will be significantly less when paying so much in rent. So, if you have the option, we recommend moving to a smaller and cheaper apartment while you save.

Moving to a smaller, cheaper rental will save you hundreds of dollars a month that can go directly toward your house savings. Plus, a smaller space usually means spending less on heat in the winter and AC in the summer, reducing your utility bills.

List Extra Rooms on Airbnb

If you’re living in a city, like Austin or Houston, a lot of people visit each year for tourism or other reasons. In that case, you can list extra rooms you have on Vrbo or Airbnb.

This may have a few unwanted start-up costs, like getting electric locks or buying furniture to fill out the rented rooms, but it can give you some extra income without the need to downsize.

5) Sell Unneeded ItemsMan selling his car

If you’re like a lot of Americans, you probably have loads of unused items cluttering your home. That stuff isn’t doing you any favors sitting around. So, why not sell it off?

There are a couple of ways you can sell those extra items:

  • Craigslist/Facebook Marketplace: Online sales forums are an easy and convenient way to get rid of unwanted items. Simply take a couple of pictures of the item, write up a description, and set a price. To accurately price an item, consider how much you paid and its current condition. The more worn out it is, the less you should list it for.
  • Garage Sale: If you’re renting a home, ask the property owner if you’re allowed to hold a garage sale on the premises. Then choose a weekend (preferably with good weather) and lay out all of the items you want to sell. To get people to come, tell your friends, put up signs around the neighborhood, or post about it on social media. You can rake in some serious cash from a garage sale.

Consider putting all the money you gain from selling these items toward your home savings. This can encourage you to keep at it with your financial goals.

6) Cut Back on Luxury Expenses

There are little things we all buy that can bring us happiness. But really, these things are non-essential. Let’s take a look at some luxuries and consider how you can save money with a few changes to your lifestyle.

Eating Out

How often do you go out to eat? Going out multiple times a week means you’re missing out on serious savings. Some studies estimate that the average commercially prepared meal is about 325% more expensive than home-cooked.

While it’s ok to eat out now and then, don’t make it the norm. Try to limit it to once a week at most. Meanwhile, you can find cheap and healthy meals to cook at home.


Streaming services, concerts, video games, and going out to movies are all fun activities that slowly drain your bank account.

If you pay for multiple streaming services, like Netflix, Hulu, and HBO Max, consider cutting a few of them. Perhaps you favor one streaming service over another anyway—just cancel your subscription for the ones you use less often. You might also rotate which streaming services you subscribe to. Get caught up on everything you want from Netflix and Paramount Plus one month, switch to Disney Plus and Hulu the next month, and so on.

For your other sources of entertainment, try to limit how much you spend. Give yourself a monthly allowance for entertainment so you can still enjoy some leisure time, while not going overboard.


Expensive gym membership? Consider switching to a cheaper one or cutting it altogether. Instead, you can grab some equipment to keep yourself in shape with at-home workouts.

Or, if you want to avoid spending money on exercise equipment, there are plenty of equipment-free exercises you can do, like running, hiking, and yoga.


Even if you come across awesome deals on air travel, resist the temptation. Between transportation, lodging, food, and souvenir shopping, you can drop thousands of dollars during trips. So, for the time being, try to avoid travel altogether so you can put more toward that nest egg.

Please note: While it’s good to cut back on these luxury items, don’t try to eliminate them. These things bring you joy, and cutting that out of your life can be discouraging.

7) Find Cheaper Alternatives for Essential Expenses

Some expenses are non-negotiable—things that you have to pay for to live. Fortunately, there are ways you can save even on these essential expenses.

Grocery Shopping

You may have some favorite grocery stores that are a bit on the pricey side—Whole Foods and Trader Joe’s, just to name a few. Even Costco, which markets bulk savings, requires an annual fee.

While these stores are more expensive, you can still shop there—just be smart about what you buy and what might be best to pick up at a cheaper grocery store like Walmart or H-E-B.

Insurance PlansTalking to an insurance agent

Health and auto insurances take a lot of money out of your account every month. While you do need these services in case of emergencies, you can also shop around for cheaper alternatives.

You may be paying for certain premiums on those insurance accounts that you simply don’t need. Take time to review your insurance details and work with your provider to see how you could cut down the costs.

Save for Your Dream Home

With the right habits, some patience, and discipline, you can save up to become a homeowner. We hope these tips will help you set up a plan and a budget to make that dream a reality.

If you need any financial assistance while you save, consider how Power Finance Texas can help. Our lending opportunities have helped countless individuals with lower credit make their payments on time. Check out our loan opportunities to see how we can help you in your financial situation.