Trying to Save a Down Payment While Renting? This Dave Ramsey Advice Could Help

Could these tips help make your homeownership dreams come true?

For many people, saving up a down payment is the biggest obstacle to becoming a homeowner. Most lenders require at least some money down. And the ideal is to put down 20% of your home's value so you can avoid having to incur the added cost of private mortgage insurance. This is a fee that protects mortgage lenders from losses in loans with small down payments, and which you foot the bill for.

It can be hard to come up with so much money when you are already paying rent for the place you currently live. But finance expert Dave Ramsey has some tips to help make the process easier. Here are his suggestions, along with some advice on which suggestions you should follow.

Here's how Ramsey says to save up for a down payment while renting

Ramsey offers eight suggestions for how you can save up the money you need to buy a home when you're currently renting. Here's what they are:

1. Create and live on a budget. Ramsey says budgeting is "how you make any money goals happen -- like saving for a down payment."
2. Repay your debt. Ramsey recommends paying off your debts before moving forward with homeownership. This includes car loans. "Be patient and keep renting until you’ve paid off 100% of your debt and saved a full emergency fund," he suggests.
3. Find a roommate to help with the bills: Having someone else paying part of your rent and utilities could give you a lot more money to save.
4. Relocate to somewhere that costs less: "Consider the worthy sacrifice of leaving the razzle-dazzle to live in an area with cheaper rent," Ramsey advises. By lowering housing costs, that frees up more money to save for your future mortgage.
5. Reduce unnecessary spending: Ramsey suggests looking carefully at your budget to find cuts such as dining out less often and taking staycations instead of traveling.
6. Sell unwanted items: If you have items in your home you aren't using, it's a no brainer to turn them into cash you can use for your down payment.
7. Bring in extra income: Finally, Ramsey recommends picking up a side hustle. "If you really want to hit the gas on your down payment savings, pick up another job on the side."

Should you follow these tips?

Ramsey is absolutely spot-on with some of his suggestions. You want to live on a budget when saving for a down payment, and you should aim to cut discretionary spending. The sacrifices you're making will be temporary and are for a good goal, so it should be easy to cut back on fun spending for a while. Bringing in extra income is also a great option.

Some of his other suggestions, though, may not be right for everyone. While you definitely want to pay off high-interest debt before becoming a homeowner, you don't necessarily need to be entirely debt free. If you have a low interest car loan and you're trying to prioritize buying a home, diverting money to paying it down may not make any sense.

Moving can also be expensive, so it's only worth relocating if it's going to take you a long time to save up your home down payment.

For the most part, though, it's worth considering Ramsey's advice and doing what you can to make your homeownership dreams a reality.