How to Trim Housing Costs

Do One Thing: Check your expectations before assuming you need a certain-sized house or apartment. You may need less space than you think. Often, cozier homes cost less than bigger ones.

Homeownership is Difficult for Many

There’s no escaping the fact that the path to homeownership for millions of Americans is pretty rough right now. Interest rates remain high while the number of homes on the market is staggeringly low.

To buy a median-priced home in the U.S. will cost $306,000 in 2025.

Here are some solid strategies for reducing your housing costs now, including your rent or mortgage, plus taxes and insurance, while continuing to plan for your future.

Consider Downsizing

Whether you rent or own, moving into smaller quarters could mean shelling out less money every month. While this may not sound like a viable option—because moving can be stressful—it’s certainly a way to save.

Plus, unconventional times call for out-of-the-box thinking, says Laura Lynch, a certified financial planner and founder of Financial Planning with Tiny-Living Values. She recommends looking at the following alternatives:

Look at Alternatives

• Considering alternatives to the typical American dream house can help reduce housing costs.
• A tiny house costs about one-third of the average sales price of a regular home.
• This lower home cost includes a lower tax, rent, and insurance cost, and is equivalent to giving yourself a 66% pay raise. 
• Plus, even if you don’t go tiny, going smaller can make a big difference.

Negotiate Your Rent

It’s wise to remember that almost everything in life is negotiable, including rent (and amenities). With pandemic pricing easing up in many markets, don’t immediately assume you’ll have to pay more next year, or even next month. Bri Conn, co-host of the Childfree Wealth Podcast, recommends the following:

• Look to see if your landlord has listed your place on sites like Zillow, Trulia, or Realtor.com, as well as their website
• While the prices should be the same, they may not be, and may even be less than what you’re currently paying.
• Ask if there are different rates available based on different lease lengths.
• Many places will lower your monthly rate if you sign a longer lease term.
• Some change the monthly price if you start a lease in the middle of the month vs. the beginning or end.

What Can Current Tenants Do?

For current tenants looking to renew a lease, Conn suggests the following:

• Pay attention to how often your landlord offers referral bonuses and take note of the specific amount being offered.
• If you start to notice they’re emailing you on a more regular basis, offering a bonus, or increasing the dollar amount.
• It could be a sign they’re struggling to sign tenants.
• If you’re planning on renewing, this can help give you leverage and potentially keep your rate the same.”

Improve Your Credit Score

Financial institutions aren’t the only organizations that use credit scores to decide how much to lend potential home buyers and at what rate. Landlords also use credit scores to help determine how much renters are charged. That means getting to work on building up your credit score could mean a lower rate on your rent or mortgage.

Work on Your Debt-to-Income

Lenders are interested in your credit score to determine creditworthiness, but are also interested in your debt-to-income ratio, or DTI. This gives them an idea of how much of your monthly income goes to pay debt. If they see that a large percentage of your income goes to pay your current debt, they may signal that you have too much debt to take on additional loans.

Fixing Your DTI

The solution is pretty simple, although not easy: increase income, decrease debt, or both. For most people, this could mean:

• Paying more than the minimum on credit cards.
• Making several micropayments to your debts every month.
• Tracking your spending to see if there are things you can cut, and reallocate those funds to paying down debt.
• On the income side of the equation, you could pick up a side gig, monetize a hobby, or take a few extra shifts every month to increase income.

Look Into Adjustable Rate Mortgages 

You may have heard the saying “Marry your house, but date your rate.” That’s where adjustable-rate mortgages can come in. Also known as ARMS, they are mortgages with a variable rate that can change annually. With interest rates still high on some other loans, the new ARMs can be appealing. Why? Because using an ARM often allows a buyer to receive a lower interest rate on the first few years of a home loan when compared to a traditional 15- or 30-year loan.

Manage Your Expectations

Don’t let yourself get sucked into buying more house than you can afford or even need. Lynch, the tiny home advocate, notes that houses have been growing in square footage over time while families have been shrinking. “It is our expectation,” she says, “of our home size that keeps us trapped in buying such a high-cost roof and paying for it for such a long time.”

 With reporting by Casandra Andrews