i can’t afford what i want

You are not alone! In this market (circa 2025) the number one issue that clients raise is an inability to qualify for a higher purchase price and/or lower the payment on the home they want.

So let’s talk first about a few strategies that may or may not be of benefit in these situations…

  1. A temporary rate buydown. This structure, often popular in higher interest rate markets, provides a below market interest rate for a temporary period – typically the first 1, 2 or 3 years of the loan. The most common is the 2-1 buydown that has a temporary rate 2% below the final rate in year one, 1% below the final rate in year two, and the reverts to the final/fixed rate for the remainder of the loan. This does significantly lower your payments in the early year(s), but it typically WON’T help increase your buying power because qualification will be based on the final/higher rate.
  2. An adjustable rate mortgage (ARM). Similar to the temporary rate buydown, an ARM generally starts with a below market interest rate. However, after an initial fixed period (in most cases 3 to 10 years), the rate will adjust based on market conditions at that time. The adjustment could raise or lower your interest rate. Once again, you may benefit from a lower payment to start, but your qualification will be based on potential upward adjustments, meaning in most cases your buying power will be limited.
  3. Lower the price. This can certainly help, but the impact is often much less than you might think. For example, with current market rates in the mid 6% range, making an offer $10k below asking pricing only lowers the payment by about $70/mo.

However, there are some strategies that can have a much more substantial impact on your ability to buy.

First, look at your current debt load. In most cases paying off debt like credit cards, auto loans, and personal loans will have a MUCH larger impact on your buying power than an increased down payment. Many home buyers get hung up on a goal down payment of 20% that has long been considered the baseline for buying a home. However, lower down payment options are available, and the average homebuyer now makes a down payment closer to 10% (FHA and conventional loans both allow for down payments as low as 3.5% and 3%). If you are struggling to find an extra $30k for a large down payment, you may be better served by reducing your down payment and paying off other high interest debt with those funds instead. Another note here – the goal of a 20% down payment is based largely on the desire to eliminate private mortgage insurance (PMI), that is typically with loans of down payment below 20%. However, there has been tremendous competition among PMI companies in recent years, and PMI is more affordable than ever.

Second, get creative with your offer. As discussed above, making a low ball offer may help a little. But, there are better ways to negotiate if you are trying to maximize your buying power. Instead of offering $10k or $20k below asking price, make a full price offer and ask for $10k or $20k from the seller to help buydown your interest rate. The net to the seller is the same – but the results for you are VERY different. On average, $10k towards a rate buydown will lower your payment about 3 times more than a $10k price reduction.

And if none of this makes sense, don’t worry. We got your back. Give us a call and we can talk about the strategy that is best for YOU.