A Simple Trick to Save for a Down Payment
Renters usually cut back expenses to save for a down payment, so downsizing their apartment to one less bedroom might get them into a house within a few years.
MONROE, La. – Saving the down payment for the American Dream – that first home – can be the biggest challenge for young renters.
Back in the late 1960s and early 1970s, this writer resided in a one-bedroom apartment for five years with a wife and two small children. We gave the bedroom to the kids and slept in the dining room. To receive a reduced rent in winter, we shoveled snow at the corner of a 16-flat in Roscoe Village and tended the hopper for the coal-fired boiler. In summer, we cut the grass and painted vacant units for the owner. Typically, we dined in our tiny apartment kitchen on spaghetti, chili, burgers and pot roast. Maybe, we ordered a $5 pizza once a week.
On my $160 a week newspaper reporter pay, it took five years to save $10,000 for our down payment. In 1973, we purchased a modest three-bedroom, one-bath stucco bungalow with an unfinished attic in the Irving Park Villa neighborhood for about $29,000. Monthly payments on the $19,000 mortgage at 7.6% interest from First Federal Savings & Loan were $175 a month.
How times have changed. Today, the majority of young people drink $5.75 Shaken espresso lattes, dine out regularly at restaurants, buy fancy automobiles and run up their credit-card debt. Currently, only one in three apartment dwellers is willing to downsize to a smaller rental unit in order to put money aside for their starter home, according to a survey of 3,700 respondents by RentCafe, a nationwide apartment-search website.
By giving up one bedroom worth of space, renters nationwide can save an average of $3,735 per year. With this in mind, RentCafe analyzed 200 cities to see where apartment renters could save up the fastest for a down payment on a starter home.
Amazingly, Chicago is ranked number four in RentCafe’s Top-50 List, despite having some of the most compact apartments nationwide. Here are the highlights of the RentCafe survey:
- For renters who are able to sacrifice space, giving up a single bedroom in Chicago will help them put aside a whopping $8,916 per year for the down payment on a home. That is the third highest annual saving in RentCafe’s Top-50 List.
- In theory, by putting this much money aside, it will take renters only two years and three months to save $20,185 for a 10% down payment on the typical starter home priced at $201,848 in the Windy City.
- According to RentCafe, Chicago apartments are some of the smallest in the country, so compromising on space can be a challenge for many. However, for thrifty renters who choose to reside in a one-bedroom unit instead of a more expensive two bedroom layout-to save for a down payment, it’s worth giving it a try.
- Suburban Chicago renters who reside in Des Plaines can save around $3,000 annually if they downsize to a smaller apartment. With starter home prices in Des Plaines at $232,773, it would take them more than seven years to become homeowners, RentCafe noted.
- In far northwest suburban Schaumburg, renters will need more than eight years to save for a starter home since they will put aside only $2,604 a year by downsizing.
- In ritzy New York, where starter home prices average $531,117, it would take a thrifty renter with a great job two years and seven months to save $53,112 for a 10% down payment, according to RentCafe.
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