2024 was another challenging year for buyers. Nationally, we saw the lowest
number of closings in over 30 years and a large decrease of first-time buyers. Not
enough houses & high prices have pushed this important segment out of the
market. Across the country more housing is starting to be built and, hopefully,
we’ll see that more locally as well. However, we are years behind in having
enough housing and interest rates are not coming down as quickly as we had
hoped. In 2025, we expect mortgage rates to come down slightly and hover in the
6% range. While this is still a “normal” range, historically speaking, many first-
time buyers were hoping for less in order to ease some of the monthly payment
burden of buying their first home.
If interest rates aren’t moving much and prices are staying high, what is does a
buyer do? Even in these conditions, home ownership is still the best tool for
building long-term financial security and generational wealth. There are options
for a buyer that is willing to think outside the box. The first, and most important,
step is to start having conversations. Find a real estate professional and local
lender that you want to work with. You’ll want someone that you like their
communication style and you trust. Look for someone who is willing to meet with
you even though you might not be ready right now. You can’t get where you’re
going if you don’t know how you’ll get there. Having a conversation sooner than
later helps you plan your path to home ownership.
Some options that you may consider want to discuss with your team (your
Realtor® and lender) include:
Low down payment mortgages
There are many options for mortgage loans with less than 20% down. Most first-
time buyers in our market utilize a loan with 0-5% down. Talk to your lender
about the total cash to close you’ll have to bring to the closing table. Then we can
work on how you’ll get the total money you need. It can be a combination of
savings, gifts, seller concessions, grants, etc.
Multi-generational living
One way buyers are looking at maximizing their dollars is by living with family.
Whether it’s living with relatives to save up money for closing costs or buying a home together to pool resources and share costs. 17 percent of homes purchased
last year were multi-generational households, the highest since 2013. This can be
done when an aging parent that needs extra care and the younger generation
can’t afford the house they want. Or maybe the older generation will use it as a
second home, while the younger uses it as their primary residence. There are
multiple arrangements that can solve many challenges for all involved. It can
either be a short-term or long-term solution depending on your needs. And it
doesn’t have to be two different generations. I had two siblings purchase a home
together this year, because they didn’t want to pay rent and buying together
allowed them to get a nicer house. I think that’s a great option for first-time
buyers that want to build their financial future.
Multi-unit living
If you expand your home search to include properties with 2-4 units, you can
decrease your costs and get income from your home. Most lenders can utilize
part of the rental income you’ll receive each month when calculating how much
you can afford. This allows you to qualify for a higher monthly payment. If you are
purchasing the property to live in and it is 4 units or less, you still qualify for the
low down payment loan programs.
With house prices still unattainable for many first-time buyers, it can be easy to
feel defeated, but home ownership can still be within your reach. It may not look
how you originally planned, but you can still create a path to home ownership
that works for you. And it can still bring you the equity to get to your dream home
down the road. It’s never too early to have a conversation and start planning.
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