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Couple holding the keys to their new home.

How to Save for a Down Payment While Renting

3 minute read

Transitioning from renting to buying a home is a big step, and it can be a daunting one at that. Not only must you save for a down payment, but you also have to keep up with your current rent and other financial responsibilities. As if this weren’t enough, the average cost of a home increased by 18% in 2021.

However, even with prices increasing, it’s possible to save for a down payment while renting. Strategic planning and having a clear goal in mind can help you free up funds for a home. Whether you’re already on your homebuying journey or just starting out, our tips below can help any renter save for a down payment.

Before All Else, Determine How Much You Must Save 

Image of a For Sale sign in front of a house.

Before you begin saving for a down payment, you first need to determine the amount you’ll need. Understanding your savings goal is essential as it will help you get a quick overview of your current standing. Ultimately, your down payment amount will depend on the cost of your home and the loan program you apply for. Most loan programs range from 3% to 20%.

A 20% down payment was once standard, but the median average in 2021 was 12%, according to the National Association of Realtors. Furthermore, government-backed mortgages such as FHA loans have down payment requirements starting at 3.5%. For those that qualify, VA loans and USDA loans may require no down payment at all. Be sure to explore all options available to you to understand how much you need to save—it may even be less than you think!

How to Save for a Down Payment While Renting 

1. Address your debt

Once you know how much you’ll need for your down payment, the first step towards saving will be addressing your debt. Carrying high-interest debt keeps you stuck in a cycle of ongoing monthly payments, which will make saving difficult. In addition, having a high debt-to-income ratio may affect your chances of qualifying for a mortgage.

When tackling your debt, a popular strategy to follow is known as the debt avalanche method. This method involves making minimum payments on all your debt accounts, then using any extra funds towards the debt with the highest interest rate. Once you pay off the initial debt with the highest interest rate, your extra repayment funds go towards the debt with the next highest interest. The method continues until all your debt is paid off. 

2. Consider using budgeting apps  

Saving is essential when preparing to purchase a home, but setting money aside is often easier said than done. To help you stay on track with your goals, we recommend utilizing budgeting apps that automate your saving.

Taking a set it and forget it approach, Digit is an app that will make money decisions for you. Digit analyzes your income and current spending habits, then determines how much money you can effectively set aside each month. Once determined, the app will periodically transfer funds into your savings account automatically.  

Couple saving money for a down payment. Putting money into a piggy bank.

3. Reduce spending 

Once you’ve eliminated non-essential spending, consider reviewing ways to save on your essentials. For example, comparing auto insurance quotes to lower your bill, opting for a less expensive phone plan, or reducing energy usage are all ways to save in essential areas.  

To maximize your savings, consider cutting back on non-essential expenses. Sure, streaming services and daily food deliveries are nice to have, but they aren’t necessities. In fact, you’ll be surprised how much savings you can find when reviewing your monthly expenses. While five dollars here and there may not seem like a lot, small purchases can quickly add up to hundreds of dollars a month.

4. Downsize, if possible

Your rent is likely the lion’s share of your monthly expenses when saving for your down payment. If possible, downsizing your living arrangements by moving to a smaller apartment can free up hundreds of dollars a month. Additionally, downsizing can lead to a lower energy bill and help you declutter your space. Another way to downsize your living arrangements is by getting a roommate. This will reduce the added stress of moving while potentially reducing your monthly rent in half.  

5. Get a side job

A delivery driver completing a food delivery.

With the gig economy constantly expanding, there are many ways to make extra money on the side. Whether it’s driving for Uber or delivering for DoorDash, consider working a few additional hours on the side to boost your down payment savings. If you’re crafty, selling goods in an online marketplace is another way to make money on the side. Sites like Etsy make it easy to open a store online and connect with interested customers. All in all, any extra income you can generate will put you one step closer to reaching your savings goal.

Save on Homeowners Insurance 

Once you’ve purchased your home, it’s important to keep it protected. At AIS, we can help you find the best home insurance coverage that fits your budget. Our Insurance Specialists compare rates from our network of insurance partners to find you the best combination of price and coverage. Speak with an Insurance Specialist today at (888) 772-4247 or visit AIS for a free online quote.


The information in this article is obtained from various sources and is offered for educational purposes. Furthermore, it should not replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. No warranty or appropriateness for a specific purpose is expressed or implied.