How to save for a house while renting

For many renters, budgeting and saving enough to purchase a home is challenging.

A 2025 NeighborWorks America survey found that nearly 48% of renters don't see homeownership as a possibility in the near future. Additionally, nearly 50% spend more than a third of their income on rent, which limits the amount they can set aside for a down payment.

Saving for a house while renting is possible. But it requires focus, discipline, consistency and personal finance strategies designed to reduce expenses and bolster your savings. Let Homes.com walk you through the steps.

If you haven't done so already, audit your monthly expenses, including housing. You should spend no more than 30% to 35% of your net monthly income on rent and utilities, experts say. That leaves 65% to 70% of your monthly income for other bills and savings.

Online tools are useful when figuring this out. "You've got to understand your numbers in terms of income and expenses," said Mike Zarrelli, certified financial planner at FSA Wealth Partners, based in Rockville, Maryland. "The best thing I've done is utilizing one of those budgeting software solutions like Monarch Money or Personal Capital. Is there a surplus? Do you need to make adjustments on the expense side of things? Or do you just need to make more money? These are questions you should ask yourself while determining your budget."

Pro Tip: In your budget, add a separate section for irregular or big purchases. This gives additional context when you review and change your budget later. When auditing your spending, you'll want to focus on your normal cashflow only.

To get a rough estimate of the price range of a house you can afford, take your annual gross income and multiply it by 2.5. For example, a person who makes $100,000 annually can roughly afford a $250,000 home. However, what you can actually afford will vary depending on your unique financial profile, specifically your credit score, debt-to-income ratio, monthly income, savings and assets.

Next, determine what your down payment would be. Homebuyers should put down at least 20% on a conventional mortgage loan, which helps you lower monthly payments and eliminate private mortgage insurance (PMI), a kind of insurance for the lender in case you fail to make payments. Other mortgage types, like Federal Housing Administration loans, allow you to make lower down payments ranging from 3% to 5%. In general, a larger down payment puts you in a better financial position after applying for a mortgage loan.

Pro Tip: Also, think about closing costs while saving for a down payment. You should factor 3% to 5% of your target home price into your down payment goal to cover closing costs.

Automating your monthly savings contributions is an excellent way to meet your down payment goal. You can open a separate savings account and automatically deposit a portion of your paycheck into that account. Some employers offer a split direct deposit option that employees can take advantage of. You could also reach out to your bank and have them split up your paycheck.

"You have to treat saving for a house as a nonnegotiable," Zarrelli said. "Setting up a separate savings account and renaming it 'house down payment fund' or something like that is the way to go, but make sure it's happening automatically."

Pro Tip: Create a visual tracker with the date, monthly contribution amount and cumulative goal and your progress. It makes your goal feel more tangible and boosts motivation.

As painful as it may be, you’ll need to cut down on unnecessary expenses like dining out, subscription-based services like Netflix or HBO Max, travel and vacations, name-brand grocery items or designer clothes. Instead, you may consider the following alternatives:

• Preparing five meals before your work week starts
• Buying from grocery stores like Aldi, Trader Joe's or others that sell private-label groceries
• Setting up a staycation and spending your vacation time at home or nearby
• Using free TV services, including Tubi, Pluto TV and the Roku Channel and get rid of paid ones

Pro Tip: You can connect your bank account to apps that will automatically identify and cancel subscriptions on your behalf.

There are several ways to methodically attack your debt. One is the debt avalanche method, which asks you to tackle high-interest debt payments first, allowing you to save more money over time. Once your high interest debt is gone, your remaining debt payments should be easier to handle — and your credit score will likely increase. "Improving your credit score, even by 20 to 30 points, can significantly impact your rate. We often advise clients to pay down debt, avoid new credit inquiries and build up reserves," Mike Gains, senior vice president of capital markets at Charlotte, North Carolina-based Cardinal Financial said.

However, if your principal is significant on any of those high-interest lines of debt, it may be a while before you see progress in your credit score. Additionally, the debt avalanche approach requires more discretionary income upfront, and more discipline than other methods.

Some prefer the debt snowball method, which involves paying off your smaller debts first before tackling your larger debts, regardless of the interest rate. This approach is great if you want to see progress faster than you would with the debt avalanche approach. However, it takes longer to knock out your interest payments. And that could make it harder to get completely out of debt in a timely manner.

"I'm a numbers guy, so I prefer the debt avalanche approach, paying off the highest interest debt first rather than paying off the smallest balance first," Zarrelli said. "That said, use whatever approach you think will work best for you. What's most important is moving the ball forward rather than staying still or going backwards on your debt repayment journey."

Pro Tip: You can reach out to your credit card company and negotiate with them to lower your debt under a credit card settlement plan. While you may still have to pay off your debt, it'll be much lower than before. Please note that a settlement plan is likely to hurt your credit score. However, you can start repairing it immediately after the settlement and see progress faster. It's much better option that defaulting and having your account sent to collections.

Here are a few more tips that can help you reach your down payment goal faster:

This could mean picking up a night job, walking your neighbor’s dogs or even starting a business. Regardless, your chosen side hustle should bring in enough income to bolster your savings. 

These funds might have been reserved for vacations and travel in the past. But now, you must deposit them into your savings account and avoid touching them. Live off your salary and bank the bonuses.

Having financial support for necessities such as food, water and utilities could help you reach your down payment goal faster.

Splitting rent payments and other bills between yourself and another person lets you save more of your monthly income and accumulate a larger down payment.

Homes.com has an online mortgage calculator that can help you estimate your potential monthly payments and factor them into your budget.

Saving for an emergency fund and a down payment at the same time can be difficult. Still, it's important. If you don't have a robust emergency fund while saving for a house, something unexpected like a medical emergency can disrupt your savings plan. Gather your emergency fund first before saving for a down payment.

Zarrelli said that it takes most renters five years to save for a new home. Here's an example based on a $400,000 home purchase goal.

"If you wanted to [make] a 5% down payment, that's $20,000 and then closing costs, which is another $10,000," Zarrelli said. "That’s $30,000 right there. To buy a $400,000 home, unless you have a lot of cash flow, most people can't save that in a year or two. That's why it is safe to say five years, saving about $5,000, $6,000 or $7,000 a year. That’s the goal."