Saving for a Down Payment While Renting

 

Why Saving While Renting Feels So Challenging

Saving for a down payment is a tall order—especially when rent keeps climbing. For many renters, it feels like just keeping up with monthly bills leaves little room to put money aside. Add in inflation, rising costs of living and existing debt and it’s no wonder so many renters feel stuck between paying rent and building toward homeownership.

But the truth is, saving for a home while renting isn’t impossible, but it does take planning, discipline over time and smart financial decisions. Whether you’re living on your own, supporting a family or juggling student loans, there are proven strategies to help you break through the rent barrier and move confidently toward homeownership.

 

How Much Should You Save for a Down Payment?

Let’s talk numbers. The amount you need depends on a few key factors:

• The price of the home you want
• The loan program you use
• Your financial goals

The traditional advice is to save 20% of the home price, which helps you avoid private mortgage insurance (PMI) and therefore lowers your monthly payment. But that’s not the only path. Many lenders offer conventional loans with as little as 3–5% down and first-time buyer programs can reduce that even further.

Here’s a quick example:

• For a $300,000 home:
  • 20% down = $60,000
  • 5% down = $15,000
  • 3% down = $9,000

Keep in mind, the more you can put down, the less you’ll pay in interest—and the more equity you’ll have from day one. But don’t let a high down payment goal stop you from giving up before you start. Even saving a few hundred dollars a month can make a big impact over time and get you closer to living your Ideal Life.

 

Step 1: Know Your Numbers and Set a Goal

Before you can save, you need clarity. Start by asking yourself:

• What kind of home am I aiming for?
• What’s the average price in my preferred area?
• What down payment percentage am I targeting?

Once you’ve estimated your down payment goal, break it down into monthly or weekly targets based on your timeline. For example, if you want to save $15,000 in two years, that’s roughly $625 per month or $145 per week. This smaller, time-bound goal makes the process feel more achievable and keeps your momentum high.

And remember: it’s not just about the number—it’s about defining your goal so that you know what you’re working toward. Defining your goal in clear and hopefully realistic terms gives you a reason to say "no" to unnecessary spending and "yes" to long-term stability.

 

Step 2: Create a Budget That Builds Momentum

Budgeting isn’t about restriction—it’s about direction. The most effective budgets aren’t the ones that squeeze every penny but the ones that reflect your values and help you hit your goals faster.

A great place to start is the 50/30/20 rule:

• 50% of income for needs (rent, utilities, food)
• 30% for wants (dining out, subscriptions, hobbies)
• 20% for savings and debt repayment

It can be surprising how apparently small tweaks—like cooking at home, canceling unused subscriptions or carpooling—can add up fast. The key is consistency and awareness. When you make progress and see progress each month, you’ll stay motivated to keep going.

 

Step 3: Cut Costs Without Sacrificing Your Lifestyle

You don’t need to eliminate joy from your life to save effectively. The goal is to spend intentionally, not miserably. Start by identifying expenses that don’t bring long-term value—and redirect those dollars toward your down payment fund.

Some easy wins:

• Dining out: Swap a few takeout nights with meal prepping or potlucks with friends.
• Entertainment overload: Consolidate to one or two streaming platforms, get a library membership or try other free alternatives such as podcasts.
• Costly gym memberships: Use free video workouts, local trails or low-cost fitness apps or gyms.
• Impulse buys: Delay nonessential purchases with a 24-hour rule. This can help eliminate many impulse purchases.

Even trimming $10–20 here and there can free up hundreds each month. That’s money better used for your future, not fleeting convenience.

 

Step 4: Boost Your Income

Cutting expenses is one side of the coin—earning more is the other. Adding just a few hundred dollars in extra income per month can accelerate your savings without overhauling your lifestyle.

Side hustle ideas that work with your schedule:

• Drive for rideshare or delivery services
• Pet sitting, dog walking or house cleaning
• Freelance writing, design or tutoring
• Selling handmade goods or unused items online

Even if you dedicate just 5–10 hours a week, the results will add up. To make the most headway with this strategy, treat all side income like it doesn’t exist and send it directly to your down payment fund. That way you don’t have to think as hard about not using it.

If possible, ask your employer about opportunities for overtime, commission or performance bonuses and commit any windfalls to your savings goal.

 

Step 5: Open the Right Type of Savings Account

Where you keep your down payment money matters. The right account should keep your savings safe, separate and steadily growing.

Here are a few smart options:

• High-yield savings accounts: These accounts offer much higher interest than typical bank accounts.
• Money market accounts: Great for higher balances and still FDIC-insured.
• Certificates of Deposit (CDs): If you know your timeline (say, 1–2 years), a CD can offer better returns. And with limited access to your funds, you won’t need as much day-to-day discipline to resist spending.

Avoid putting your down payment in investment accounts or the stock market—market volatility could reduce your savings right when you need it.

 

Step 6: Stay Consistent by Automating Savings

One of the most powerful ways to grow your down payment fund is to take willpower and brainpower out of the equation. Automation makes saving easy and consistent and can usually be done quite easily:

• Set up direct deposit splits so a portion of your paycheck goes directly into your savings.
• Schedule recurring transfers to move money from checking to your savings every payday.
• Use “round-up” apps that deposit spare change from everyday purchases into your savings automatically.

Consistency beats intensity. Even if you’re only saving $100 or $200 a month, automation makes it frictionless—and helps you resist the temptation to spend it elsewhere.

 

Step 7: Explore First-Time Homebuyer Assistance Programs

You don’t have to go it alone. Many federal, state and local programs are designed to help renters become homeowners—especially if it's your first time.

Saving for a down payment doesn't have to be a solo journey. In Minnesota, a variety of down payment assistance programs make homeownership more accessible—especially for first-time and first-generation buyers.

Programs like the Minnesota Housing Finance Agency’s Start Up and Step Up loans, Deferred Payment Loans and the Welcome Home Down Payment Assistance Program offer thousands of dollars in support for eligible buyers. Local initiatives, such as the Minneapolis Homes Program, provide additional help for buyers purchasing within city limits.

To qualify, you’ll generally need to meet the income limits of the relevant program, complete a homebuyer education course and secure pre-approval for a fixed-rate mortgage. Ideal Credit Union can help to guide you through applying and matching you with the right assistance program—making your journey to homeownership faster, easier and more affordable.

 

Should You Pay Off Debt First or Save More?

It’s one of the biggest questions renters face: Should I focus on paying down debt or building my down payment?

The answer depends on your personal financial picture. Here’s how to think about it:

Pay Off Debt If:

• You have high-interest debt (like credit cards)
• Your debt-to-income ratio (DTI) is too high to qualify for a mortgage
• Your credit score needs a boost before applying

Focus on Saving If:

• Your debt is low-interest or monthly payments are very low
• You’re close to qualifying for a mortgage
• A bigger down payment would eliminate your PMI or lower your interest rate

Sometimes, the best solution can be a hybrid approach—pay off high-interest or low-balance debts while still saving steadily. That way, you’re improving your credit and building your down payment at the same time.

 

Rent-to-Own or Co-Buying

If you’re struggling to save to buy a home the traditional way, there are alternative paths to consider. As with any homebuying, proceed carefully. Buying a home is the largest purchase most of us ever make in life and it should be approached with corresponding prudence.

 

Rent-to-Own

You rent a home with the option to buy later. Part of your rent may go toward your future purchase. It sounds convenient and it can be, but it often comes with:

• Higher monthly payments
• Non-refundable fees
• Contracts that may not be in your favor

Make sure you understand the terms and risks before committing.

 

Co-Buying

Buying a home with a friend, sibling or partner can help you:

• Share the down payment
• Split mortgage, taxes and utilities
• Access a higher price point

Just be sure to set clear expectations and sign formal agreements regarding what will happen if one of the parties should need to move or sell the home. Co-buying works best when all parties have legally defined and aligned their expectations and possible outcomes.

 

The Bottom Line

Saving for a home while renting probably won’t be easy—but it is definitely an achievable goal. With a clear goal, a strategic budget and consistent savings habits you can move closer to homeownership every month.

Whether your timeline is one year or five, what matters most is that you start as soon as possible. Doing something to get started toward your goal is much more important than starting perfectly. Often, trying to be perfect right from the start leads to never starting or to discouragement when you realize you made a mistake.

The worst plan is the one that’s never executed. Contact our real estate team today to get started planning your goals and open a CD or savings account once you’ve defined them!