More Than Half of Renters Think They’ll Never Own a Home — Here are 5 Tips to Improve Your Prospects

"House Surrounded By Money, Coins, Pennies, Nickels, Dimes and Quarters on a White Background with Copy Space.
CHRISsadowski / Getty Images

The combination of soaring inflation, high rents and rising mortgage rates have many Americans doubting whether they’ll ever be able to buy a home. More than half of those recently surveyed by Credit Karma don’t believe they’ll ever own one — and more than one-fifth say they can’t even afford to pay rent anymore.

See: Average American Renters Can’t Afford Starter Homes
Find Out: Should You Still Buy a Home in Today’s Market?

The survey of more than 1,000 U.S. adults, conducted in October and released this week, found that 54% of renters have given up believing they will own a home. More than one-third (37%) have to sacrifice necessities to pay their current rent. About one in five (22%) can no longer afford to pay the rent, while a similar percentage say they’re dependent on money from family to pay it.

Even with signs of a cooling rental market, many Americans are still struggling with high cost-of-living expenses, stagnant wages and high borrowing costs, according to Colleen McCreary, consumer financial advocate at Credit Karma.

What can renters do to improve their prospects of one day owning a home? A good first step, experts say, is to keep things in perspective by remembering that high inflation won’t last forever and mortgage rates will one day head back down again..

In terms of developing a plan for home ownership while you are still renting, here are five proactive steps you should take:

Building Wealth

Assess Your Financial Situation

A blog on the Toll Brothers website recommends figuring out your borrowing capacity and calculating how much you’ll need for a down payment. This will give you a target to aim for and help you develop a plan for getting there. Despite what you might have heard, you don’t have to put 20% down on a mortgage. Some mortgages backed by Fannie Mae and Freddie Mac require only a 3% down payment, while FHA loans might require just 3.5%, according to HomeBuyer.com.

Develop a Budget

Take a look at what you are spending now and where you can cut back. Some financial advisors recommend the 50/30/20 rule: putting 50% of your income toward mandatory bills such as rent and utilities, 30% toward discretionary spending on shopping and entertainment/dining out, and 20% toward savings. But if you are determined to save for a home, you can reduce the amount of discretionary spending and increase the amount you put toward savings.

“Creating a budget gives you more control of your money and helps hold you accountable,” McCreary told GOBankingRates in an email. “By creating a roadmap and setting intentions around your spending, you increase your chances of following through with your home savings goal.”

Building Wealth

Reduce Your Debt

Credit card debt is a killer in terms of trying to build savings for a new home. Whenever possible, pay off your credit cards and avoid using them in the future. Aim to pay off those with the highest annual percentage rates first. Just make sure you keep the accounts open even after they are paid off to improve your credit score.

Multiply Your Savings

McCreary recommends putting any savings you already have into high-yield savings accounts to get the best return.

“Consider having a dedicated savings account for home savings and another for emergency savings,” she said.

Build Your Credit Score

If your goal is to one day buy a home, you’ll need a good credit score to qualify for a mortgage loan – preferably 620 or higher. One way to build your credit score is to reduce your debt and pay off any delinquent accounts. You can also take advantage of tools such as Credit Karma’s Credit Builder program, which McCreary describes as “essentially a locked savings account” that shows up on a member’s credit report as a line of credit. You can then make payments on a weekly, biweekly or monthly basis.

Building Wealth

Have Any $200 Quarters Lying Around? It’s Worth Checking Your Spare Change

“This helps consumers establish a healthy habit of borrowing and results in a nest egg once they’ve ‘paid off’ their line of credit,” McCreary said.

More From GOBankingRates

Share This Article:

Building Wealth

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
Learn More