Hoping to Buy a House? Real-World Reasons You Should Not Give Up

Maybe it's time to approach house hunting with seller concessions in mind.

If you're hoping to buy a home, no one needs to tell you how ridiculous the housing market has been. You've lived with bidding wars, unwise advice to waive home inspections, and rising interest rates. It's enough to make anyone want to stop looking. If you're considering giving up the dream of homeownership, don't make the decision just yet. It looks like the tide may be turning. 

To find out why, we turned to Wendi Boudreau, a real estate agent with Keller-Williams in Simi Valley, California. Boudreau explained the real-world reasons potential home buyers should keep the faith. 

The market truly is cooling

According to Boudreau, the market was still red hot into the summer. Most homes received multiple offers and anyone hoping to buy was expected to pay far above the asking price. Some sellers refused to allow for contingencies, like home inspections. Investors scoured the market daily to find homes they could flip. It was clearly a seller's market. 

Boudreau says she first noticed a changing of the tides as summer ended. Suddenly, sellers with anything other than a move-in ready house were forced to drop their asking price. And as interest rates rose, fewer buyers were interested in making an offer. 

By September, an analysis from Zillow announced precisely what Boudreau witnessed first-hand: The housing market is cooling. In fact, according to Zillow, experts expect the U.S. housing market to shift in favor of buyers by the end of 2023. 

A big piece of the cooling trend is associated with rising interest rates. But there is also buyer burnout. A buyer can only lose out so often before deciding that now is not the right time. 

Home buyer programs make a difference

Throughout the changing market, Boudreau has continued to sell homes to first-time buyers. And that's due, in large part, to advice she offers. 

"I tell my buyers to look at different mortgage lenders because every lender is different. And then, talk to a couple of lenders to find out what kinds of programs they offer," Boudreau said. 

Here's a small sample of the programs offered to home buyers that they may not know about:

• $25,000 Down Payment Toward Equity Program: A grant that awards up to $20,000 cash to first-generation home buyers, plus an additional $5,000 to buyers from economically disadvantaged backgrounds. This program is expected to be passed into law in early 2023.
• The National Homebuyers Fund: Home buyers who agree to live in their home and make payments for at least five years may receive up to 5% of the home's purchase price. 
• State and local government cash grants: The amount varies depending on the state, but anywhere from $500 to $50,000 may be applied toward a mortgage rate reduction, down payment, or closing costs. Most of these grants have income restrictions.
• FHFA first-time home buyer mortgage rate discount: First-time buyers who use a Fannie Mae or Freddie Mac-backed mortgage and earn an income at or below their area's typical income can qualify for a mortgage rate up to 2% lower than the standard 30-year fixed-rate mortgage. Let's say the current rate on a 30-year mortgage is 7%. This program would reduce it to 5%, allowing the buyer to boost their purchase price. 

There are dozens of buyer programs nationwide, designed to ease the financial burden of getting into a home. Boudreau reiterates that it's important that buyers shop around to find the program that best fits their needs.

Shopping around also allows buyers to find out which lending institution has the lowest rates. For example, Boudreau said that she recently found a nearby credit union that had a rate "no one else could touch." You never know which bank or credit union will end up being most competitive. 

Home seller credits are becoming common again

According to Boudreau, it's becoming increasingly rare for a home seller to demand that buyers waive contingencies like home inspections. Asked why she thinks that's the case, Boudreau answered, "People can read the news and they know what's going on." 

In other words, home sellers seem to realize the market has softened, that fewer buyers are interested in buying anything less than a "perfect" home, and that concessions must be made.

One of those concessions is a seller credit. Those credits may come in the way of money back to the buyer at closing to help cover closing costs or the seller may offer enough money to buy the buyer's interest rate down to a more manageable level.

Boudreau said that she and her husband once bought their own interest rate down, not knowing it's okay to ask the seller to contribute those funds. She doesn't want her buyers to make the same mistake. 

"Some sellers are going to say no," Boudreau said. "They may even pull their house off the market. But those people were not that serious about selling in the first place. This time of year, both buyers and sellers are serious. After all, people do not want to put their house on the market during the holidays."  

The point is that it never hurts to ask. If a buyer can't afford a house payment due to the interest rate, ask the seller to buy that interest rate down. It's often less expensive than dropping the price of the home.

Don't give up

"Owning a home is the path to becoming middle class. Historically, it's how the middle class has passed wealth on to descendants," Boudreau said. 

She makes it a point to encourage buyers to keep going and to take advantage of every program and credit available to them. 

"You just have to have faith," she said. "Don't give up. It will happen. It's only a matter of time. And every time you don't get a house, just know that it wasn't the right one."