Your guide to breaking the rental cycle

May 26, 2022

Falling into a pattern of renting living space is common, but becoming a homeowner is attainable. Use this guide to make a plan that fits your goals. 

 

For many, finding a room, apartment or home to rent is a natural step when starting life on your own as a young adult. Renting is a sensible choice in many situations and has its own advantages – there’s flexibility on how long you’ll stay in one place, monthly payments that fit almost any budget, and building care and maintenance are typically managed by the landlord. But after a while, homeownership often becomes a better alternative. From a financial standpoint, buying property could serve as a long-term investment. Rather than spending money on rent each month, you’re working towards owning your own asset. Here are a few things to consider as you plan your path to becoming a homeowner.

 

Commit to your goal early on

One of the biggest challenges in ending the rent cycle and buying your first home is saving enough money to put towards buying a home. While saving up will likely take time, the first step to homeownership is to set clear intentions of owning a home. Establishing this as a goal and deciding you’re ready to make it a priority will help you find opportunities to set aside money when possible. Are there any expenses like cutting streaming subscriptions or other extra monthly costs you can eliminate and start saving?

For Maddie Martini, a marketing specialist at U.S. Bank, having the long-term goal of homeownership was a catalyst for responsible saving strategies, which benefitted her over time and allowed her to purchase her first house. “I always knew that I wanted to buy a house, so I never spent a crazy amount on rent or anything like that,” she says. “I made sure I was never outspending my means so I could keep building that savings slowly but surely.”

 

Find a down payment plan that works for you

While some people are able to provide a 20% down payment on their home, there’s no one-size-fits all rule that applies to every situation. Everyone’s finances are a little bit different, and there are a variety of down payment options that can work depending on your needs.

For example, private mortgage insurance is an option with some conventional loans for borrowers whose down payment is lower than 20% of the purchase price. This is used as a way for the lender to ensure they’ll be paid back and makes loans more accessible to those who don’t have a 20% down payment. However, doing so means your loan will be more expensive – an additional fee (private mortgage insurance or PMI) is included in your monthly payment or closing costs, but could go away once your loan meets certain requirements, depending on the type of loan. It’s especially important to stay on top of your payments in this situation, as being late with your payments can affect your credit score.

“When I realized that my monthly payment would actually be less than renting, that was a huge thing for me.”

If you’re able to pay 20% or more up front, you’ll have several advantages. Because you’re paying off a large portion of the price right away, your loan and monthly payments will be smaller than if you were to put down less than 20%. Your interest rates could be lower as well, and you’ll be in a secure position with potentially more equity from the start.

 

Map out your monthly costs

Once you have a plan to save for a down payment, the additional monthly fees you’ll pay are often similar to rent costs, or could even be more affordable depending on your circumstance. “When I realized that my monthly payment would actually be less than renting, that was a huge thing for me,” says Maddie.“I’m paying less each month than I ever was when I was renting – that made me decide I can actually afford this.”

When making a budget for purchasing a home, it’s important to look closely at how the timeline of payment will work – not just the listing price. Calculating fees like property taxes, homeowner’s insurance, utilities and homeowners’ association costs for condos will help you get a realistic idea of a cost breakdown, so you can determine what aligns with your income and long-term financial situation.

If you’re a first-time home buyer or have a limited budget, you may want to consider looking at properties such as duplexes where you could lease a portion of the space for extra income. You can also designate a spare bedroom for a potential roommate, which will help offset monthly costs. Keep in mind that you don’t necessarily need to live in your first home forever – you can look at your home as an asset and first step on your path toward economic stability.

 

Connect with professionals 

When you feel ready to move forward with your home search, you’ll want to contact professionals who can help you each step of the way. Your real estate agent will be able to guide you throughout the process and narrow down which properties have the features you’re looking for within your price range. Your mortgage loan officer (MLO) will also work with you to get pre-approved for a loan so that you’re eligible to make a purchase when the time comes.

“The market [where I bought my home] is very competitive, so you have to move quick,” says Maddie. “If you're thinking about it, get preapproved, talk to a mortgage loan officer – make sure you’re prepared for all those things.”

Having the paperwork and a relationship with your home professionals early on in the home buying stages will help empower you to make a competitive and timely offer as soon as a home you love comes on the market. Your real estate agent’s and MLO’s primary roles are to support, educate and advocate for you so you can ultimately end up making a smart, confident choice in selecting a house. With careful planning, budgeting and assistance from professionals, soon you’ll be on your way to breaking the rental cycle and becoming a home owner. 

 

Dreaming of buying your first home? Learn about what types of credit scores qualify for a mortgage and how you can improve your score.

Related content

10 uses for a home equity loan

Is a home equity line of credit (HELOC) right for you?

These small home improvement projects offer big returns on investment

What is a home equity line of credit (HELOC) and what can it be used for?

What is refinancing a mortgage?

U.S. Bank asks: Do you know your finances?

U.S. Bank asks: Transitioning out of college life? What’s next?

Multigenerational household financial planning strategies

LGBTQ+ financial planning tips

How to manage your finances when you're self-employed

ETF vs. mutual fund: What’s the difference?

A beginner's guide to investing

4 benefits of independent loan agents

Changes in credit reporting and what it means for homebuyers

What’s the difference between Fannie Mae and Freddie Mac?

Preparing for retirement: 8 steps to take

Good debt vs. bad debt: Know the difference

How to protect your digital assets in your estate plan

Know your debt-to-income ratio

How to apply for federal student aid through the FAFSA

Managing the impacts of appraisal gaps in a hot housing market

Your guide to breaking the rental cycle

7 steps: How couples and single parents can prepare for child care costs

How I did it: Built living spaces to support my family

How can I help my student manage money?

Adulting 101: How to make a budget plan

Personal finance for teens can empower your child

House Hacks: How buying an investment property worked as my first home

What is Medicare? Understanding your coverage options

Using 529 plans for K-12 tuition

LGBTQ+ retirement planning: What you need to know

How to track your spending patterns

How to talk about money with your family

Financial steps to take after the death of a spouse

Finance or operating lease? Deciphering the legalese of equipment finance

Take the stress out of buying your teen a car

It's possible: 7 tips for breaking the spending cycle

Personal loans first-timer's guide: 7 questions to ask

Be careful when taking out student loans

Is raising backyard chickens a good idea financially?

How to expand your business: Does a new location make sense?

5 reasons why couples may have separate bank accounts

Key considerations for launching an ILP

You can take these 18 budgeting tips straight to the bank

The secret to successful service provider integration

What is an escrow account? Do I have one?

Preparing for homeownership: A guide for LGBTQ+ homebuyers

How I did it: Turned my side hustle into a full-time job

Get more home for your money with these tips

Beyond the mortgage: Other costs for homeowners

Checklist: financial recovery after a natural disaster

4 ways to free up your budget (and your life) with a smaller home

How I did it: Paid off student loans

Money Moments: How to finance a home addition

Do you and your fiancé have compatible financial goals?

How to plan and save for adoption and in vitro fertility treatment costs

Is it time to get a shared bank account with your partner?

Recognize. React. Report. Caregivers can help protect against financial exploitation

Tips for working in the gig economy

How much money do I need to start investing?

How to build wealth at any age

Your 4-step guide to financial planning

Which is better: Combining bank accounts before marriage — or after?

10 ways to increase your home’s curb appeal

ESG-focused investing: A closer look at the disclosure regulation

Common pitfalls to avoid in the equipment financing process

High-cost housing and down payment options in relocation

Webinar: ESG for Corporations: Building an all-weather, long-lasting strategy

Investing myths: Separating fact from fiction in investing

9 simple ways to save

6 tips for trust fund distribution to beneficiaries

4 times to consider rebalancing your portfolio

3 types of insurance you shouldn’t ignore

Here’s how to create a budget for yourself

Unexpected cost savings may be hiding in your payment strategy

Dear Money Mentor: What is cash-out refinancing and is it right for you?

How do interest rates affect investments?

Lost job finance tips: What to do when you lose your job

Do your investments match your financial goals?

6 ways to spring clean your finances and save money year-round

The unsung heroes of exchange-traded funds

Saving for a down payment: Where should I keep my money?

What Is a 401(k)?

At your service: outsourcing loan agency work

Employee benefit plan management: trustee vs. custodian

What you need to know about renting

What financial advice would you give your younger self?

Travel for less: Smart (not cheap) ways to spend less on your next trip

What type of investor are you?

4 major asset classes explained

Is a Health Savings Account missing from your retirement plan?

7 things to know about long-term care insurance

How to open and invest in a 529 plan

How grandparents can contribute to college funds instead of buying gifts

7 financial questions to consider when changing jobs

Retirement planning in the gig economy

Key milestone ages as you near and start retirement

Retirement expectations quiz

How to start investing to build wealth

Annual insurance review checklist

Bull and bear markets: What do they mean for you?

4 strategies for coping with market volatility

Do I need a financial advisor?

Retirement income planning: 4 steps to take

Renewing your custody contracts? Negotiate the fees.

Webinar: Mindset Matters: How to practice mindful spending

3 awkward situations Zelle can help avoid

Car shopping: Buying versus leasing your next vehicle

Dear Money Mentor: When should I refinance a mortgage?

Should you buy a house that’s still under construction?

Tips for navigating a medical hardship when you’re unable to work

What’s in your emergency fund?

How institutional investors can meet demand for ESG investing

Resources for managing financial matters after an unexpected death

Don’t underestimate the importance of balancing your checking account

Overcoming high interest rates: Getting your homeownership goals back on track

4 questions you should ask about your custodian

Interval funds find growing popularity

Building a dream home that fits your life

4 tips to help you save for retirement in your 20s

Money Moments: How to manage your finances after a divorce

Talent acquisition 101: Building a small business dream team

Can fantasy football make you a better investor?

Money Moments: 8 dos and don’ts for saving money in your 30s

5 questions to help you determine your investment risk tolerance

5 unexpected retirement expenses

A guide to tax diversification and investing

How to retire happy

Understanding yield vs. return

Working after retirement: Factors to consider

6 pandemic money habits to keep for the long term

Year-end financial checklist

4 steps to finding a charity to support

Insource or outsource? 10 considerations

What are alternative investments?

From LLC to S-corp: Choosing a small business entity

6 questions to ask before buying a new home

What you should know about buying a car

Your financial aid guide: What are your options?

How to get started creating your business plan

How having savings gives you peace of mind

Webinar: Mortgage basics: How much house can you afford?

8 steps to choosing a health insurance plan

Make your business legit

4 reasons estate planning is important

Reviewing your beneficiaries: A 5-step guide

Is it the right time to refinance your mortgage?

Dear Money Mentor: How do I set and track financial goals?

I own two electric vehicles. Here’s what I’ve learned about buying and driving EVs.

5 things to avoid that can devalue your home

5 financial goals for the new year

Estate planning documents: Living trusts vs. will vs. living will

Investment strategies by age

Military homeownership: Your guide to resources, financing and more

Is it cheaper to build or buy a house

30-day adulting challenge: Financial wellness tasks to complete in a month

What are conforming loan limits and why are they increasing

The connection between your health and financial well-being

Friction: How it can help achieve money goals

How I did it: My house remodel

How do I prequalify for a mortgage?

8 steps to take before you buy a home

5 financial benefits of investing in a vacation home

7 diversification strategies for your investment portfolio

Capitalizing on growth in the private equity space

Money management guide to financial independence

Buying or leasing? Questions to ask before signing a contract

Home buying myths: Realities of owning a home

What military service taught me about money management

5 steps to take before transitioning your business

OCIO: An expanding trend in the investment industry

7 year-end tax planning tips

Should I itemize my taxes?

Financial gifts can be a valuable – and fun – choice for the holidays

For today's homebuyers, time and money are everything

Understanding guardianship and power of attorney in banking

Effects of inflation on investments

How to use debt to build wealth

How to winterize your vehicle

Housing market trends and relocation impact

For today's relocating home buyers, time and money are everything

Crypto + Relo: Mobility industry impacts

How I did it: Bought a home without a 20 percent down payment

The lowdown on 6 myths about buying a home

Multiple accounts can make it easier to follow a monthly budget

How I did it: Learned to budget as a single mom

What’s a subordination agreement, and why does it matter?

How to stop living paycheck to paycheck post-pay increase

Money Moments: Tips for selling your home

Parent checklist: Preparing for college

Should you get a home equity loan or a home equity line of credit?

Quiz: How prepared are you to buy a home?

How to establish your business credit score

Checklist: 10 questions to ask your home inspector

How to save for a wedding

How to save money while helping the environment

Money Moments: 3 smart financial strategies when caring for aging parents

Save time and money with automatic bill pay

Tips to overcome three common savings hurdles

Webinar: Uncover the cost: Wedding

Webinar: Uncover the cost: International trip

How I did it: Bought my dream home using equity

Buying a home Q&A: What made three homeowners fall in love with their new home

Spring cleaning checklist for your home: 5 budget-boosting tasks

Checklist: 6 to-dos for after a move

Webinar: Uncover the cost: Building a home

10 questions to ask when hiring a contractor

4 questions to ask before you buy an investment property

Webinar: Uncover the cost: Home renovation

How to use your home equity to finance home improvements

What to know when buying a home with your significant other

Webinar: Mortgage basics: Buying or renting – What’s right for you?

Webinar: Mortgage basics: What is refinancing, and is it right for you?

Webinar: Mortgage basics: Prequalification or pre-approval – What do I need?

Webinar: Mortgage basics: How does your credit score impact the homebuying experience?

Webinar: Mortgage basics: Finding the right home loan for you

Webinar: Mortgage basics: 3 Key steps in the homebuying process

Home equity: Small ways to improve the value of your home

11 essential things to do before baby comes

Closing on a house checklist for buyers

What you need to know as the executor of an estate

What documents do you need after a loved one dies?

How to prepare for a natural disaster

Student checklist: Preparing for college

Webinar: Uncover the cost: College diploma

Webinar: Bank Notes: College cost comparison

Is online banking safe?

7 steps to keep your personal and business finances separate

Your quick guide to loans and obtaining credit

Crypto + Homebuying: Impacts on the real estate market

How liquid asset secured financing helps with cash flow

Questions to ask before buying a car

Can you take advantage of the dead equity in your home?

7 tips to help grow your business after launch

How to test new business ideas

Costs to consider when starting a business

How to sell your business without emotions getting in the way

10 tips on how to run a successful family business

The costs of hiring a new employee

How to build a content team

Safeguarding the payment experience through contactless

ABCs of ARP: Answers to American Rescue Plan questions for counties

A first look at the new fund of funds rule

COVID-19 safety recommendations: Are you ready to reopen?

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.