Want to Know How All Your Friends Are Buying Homes? This Is How

Buying a house today can be really hard for those who don't already own property. In the second quarter of 2023, the median home price hit $416,100. Mortgage rates also recently hit a 23-year high.

With mortgage loans costing more and home prices up, it may feel absolutely impossible to become a property owner. You'll need a larger down payment and have more money coming out of your checking account each month to afford mortgage payments. And for many young people, it is impossible. But that's not the case for all young people.

If you're watching your peers and wondering just how they can actually afford to buy homes, here's the answer you may be looking for.

Is this the reason your friends can afford to buy a house and you can't?

According to a recent survey conducted by Redfin, there's a simple reason why some younger people are able to buy homes while others struggle: Many of those who are purchasing property have family help.

In fact, a shocking 38% of recent home buyers aged 30 or under obtained money from either an inheritance or a gift from family members in order to make their down payment. This family money can go a long way toward making ownership more affordable for a few reasons, including:

• A higher down payment makes more mortgage lenders willing to provide loans.
• Those who manage to make a down payment of 20% or higher can avoid added costs associated with private mortgage insurance.
• A higher down payment means you can borrow less, which makes monthly payments more affordable.

Plus, of course, it's almost always necessary to have some money to put down to be able to buy a house at all unless you can qualify for a special government loan like one backed by the FHA or USDA.

Even if you're putting just 3% down, which is the absolutely bare minimum most conventional lenders would require, you'd be looking at needing a $12,480 down payment to buy a median-priced home. And if you wanted to put down 10% to gain access to more loan options, you'd need about $41,600. That can be really hard to come by without family help.

What can you do if you don't have family support?

With so many people under 30 getting family help, it becomes even harder for those who don't have this support to be able to buy homes. That's because those who get assistance can keep up the demand for starter homes so prices don't fall. If close to 4 in 10 young people didn't get this help and no one could pay today's high prices for starter homes, then costs might come down.

Since that's not the case, though, the big question is what to do if you don't have relatives who can help you with a down payment. And you do have a few options, including:

• Looking into first-time home buyer assistance programs. Both the government and private lenders do provide special assistance for home buyers who need help buying property. You can check with the Department of Housing and Human Development to find programs in your area. For example, here's a guide to options in Pennsylvania.
• Buying a fixer-upper. If you have the knowledge and time, you can buy a cheaper home that needs some updating. You can earn sweat equity. Just be sure you understand what the finished cost and the value of the home will be after you remodel so you don't overspend.
• Waiting. There's nothing that says you have to become a homeowner right now. You can keep saving for a down payment in case you want to buy in the future and rent for a while until mortgage rates come down to a more reasonable level.

The important thing is not to feel bad if it seems like your peers are ahead of the game when buying homes. They may have generational wealth giving them a leg up that you aren't aware of.