Saving For a Down Payment While Renting? 4 Tips You Must Start Now!

Saving for a down payment while renting is no small task. Unlike those with the luxury of living with parents or friends and saving money, you most likely have to pay rent that takes a significant portion of your paycheck. However, hope is not lost for you owning a home. Moreover, with the right strategy, you can still save for a down payment while renting. We won’t sugarcoat it though, for most people this will be at least a one-to-two-year goal. So, strap in for a long-term strategy. Here are four tips you can use when saving for a down payment while renting.

1. Defining your down payment
2. Cut down on expenditures
3. Side job
4. Have a special account with automatic deposits

Defining your down payment

When it comes to saving for a down payment while renting you need to have a solid strategy. The basis for your strategy should come from realistic plans and real estate market research.

Essentially, you need to define your standards for a home and be specific about how much you need to save for a down payment. You can do this by taking the average price of homes in a given area. However, this presents another problem. How much should you save? 20%, 10%, 5%? The truth is that this is different for every buyer. Many experts recommend putting down at least 20% to avoid private mortgage insurance (PMI). Except that might not be feasible for everyone. It may make more sense to put down a lower payment if it means that you have to pay less in your mortgage payments than you would for rent.

There are also a ton of programs for first-time buyers that offer generous loans with down payments of as little as 3.5%. The best way to find out what type of loan can best serve your needs is to talk with the right realtor who can recommend options to you. They can also help you find a mortgage lender as well.

Cut down on expenditures

This is the piece of advice that pops into everyone’s head when saving for a down payment while renting. Cutting unnecessary expenditures is the fastest way to put money in your pocket. There’s no external output required from you other than you cancel a service. Keep in mind though, there are a couple of different ways to cut spending. However, a specific piece of advice that we would like to give you is to never cut a service that you feel has a very positive impact on your psychological state without a replacement.

Obviously, there are levels to this. For instance, a couple of streaming services may cost around $60, while membership at a gym can cost $60 as well. It may be prudent to keep that gym membership if it will help you mentally and physically be better prepared for the world. That being said, you shouldn’t cut the cord to those memberships without having some alternatives. Go out and find free content in things like YouTube, podcasts, websites, free trials, library services, and more. While this may not be of the same quality, it can help you not miss those services as much. If you’d like to cut the gym price out of your life or lower that monthly payment, consider using an alternative like a workout app. Other ways to cut costs include:

• Take public transportation
• Pay down debt or consolidate debt
• Switch insurance providers for the best rate
• Switch to cash only
• Make your own homemade snacks instead of buying at the store
• Carpool to work
• Eat out less (try having a potluck where your friends bring food)
• Stop contributing to a retirement account (only for a specific period of time)
• Sell a car to get out of a car payment
• Downloading an app that will tell you the best places for cheap gas
• Have a strict shopping list
• Use coupons or rewards
• Find a cheaper place to rent
• And more!

There are a ton of lists online to find little ways to cut expenses that make a big difference overall.

Side Job

If you are truly serious about saving for a down payment while renting, consider a part-time job on the side. Getting a part-time job to help you save for a home can help you in multiple ways:

1. You make money.
2. You gain experience.
3. Your income looks larger which could help you secure a better loan.
4. You can pay down debt quicker.

The problem with having a side job while working full time is that it can be exhausting. You may find yourself working 7 days a week, which can be extremely hard when you have kids. If you are going to take a part-time job, try to find something that will serve your needs on multiple fronts. Maybe your part-time gig can be flexible and help you gain new experience in an industry. Maybe your part-time job offers high pay and looks good on a resume. Whatever the side job, make sure it’s worth your time not only for saving for a down payment but professionally as well.

Have a special account with automatic deposits

One of the easiest ways to go about saving for a down payment while renting is to set up a savings account with automatic deposits. Essentially, you “set it and forget it.” Make sure you shop around for a savings account that is a High-Yield Savings Account. In these types of accounts, interest rates are higher on that cash. Year over year, your money will grow faster than it would if it sat in a normal savings account.

Like this content and want more? Check out our article on the secrets no one told you about buying a home. Ready to talk to someone about buying a home? MWT Realty can help you! Our staff of highly trained individuals can help you find the home you want, in the location you want, at the price you want. Contact us today to find out how we can help you.