How To Save For A House While Renting

While it may seem very difficult to save for a house while renting, there are a few subtle ways you can start building toward a down payment.

Ways To Save For A House While Renting

One of the biggest myths of the housing market is that you need to put 20% down to qualify for a mortgage. In fact, the average homebuyer only puts down 12%, while first-time homebuyers put down an average of 7%. Now, owning a home may seem more attainable one day. Use these tips to save some money while renting.

1. Create A Budget

It’s best to start by implementing a tight budget and sticking to it, especially once you have a firm financial goal in mind. Try following the common 50/30/20 rule. This is where you allocate portions of your paycheck to these expenses:

• 50% to essential living expenses like food and housing.
• 30% to lifestyle expenses like dining and entertainment.
• 20% to miscellaneous expenses like paying off loans and debts.

2. Get A Roommate

One of the easiest ways to cut back on rent costs is by finding a suitable roommate. By doing this, you can instantly cut your rent and all utilities in half. These savings will really add up as you eye a potential down payment.

3. Cut Back On Unnecessary Expenses

It’s always best to consider cutting back on unnecessary expenses, especially when you are trying to save money for a house. Try to cut back on shopping or go out to eat less often. Small changes will end up being worthwhile once you are finally turning the key to your future home.

4. Pay Off All Debts

You must factor in your credit score and debt-to-income ratio. These are key factors that lenders will consider when qualifying you for a loan.

5. Boost Your Credit Score

Borrowers who have higher credit scores typically have a lower interest rate. This is because lenders trust them to pay their debts based on their previous payment history. However, borrowers with lower scores ultimately pay more because they pose a higher risk to lenders. Try to aim for a credit score in the 600s before buying a home.

6. Save Your Tax Refunds

Try to resist the urge to spend your tax refund right away. Instead, stick your refund into your savings account for your future home.

7. Pay All Bills On Time And In Full

Setting up automatic bill payments can take the pressure off when it comes time to pay your bills. Make sure to pay your bills in full and on time each and every time.