Resources to Make Home Ownership Affordable with Inflation and Increasing Mortgage Rates

Home ownership remains one of the foundations of the American dream, but today it requires more creativity to make it affordable than it once did. With rising interest rates and housing prices continuing to rise, you may be wondering if now is a good time to buy a home. It can be. Despite inflation, owning a home is still a viable option for affordability.

Buying that three bedroom two bath starter house with the manicured lawn on the tree-lined street where you grew up, was a challenge a year ago when giddy sellers were receiving multiple cash offers well over asking price. It’s equally challenging now that the interest rates on 30-year mortgages are twice what they were a year ago. In July, mortgage buyer Freddie Mac reported that the 30-year rate rose to 5.54 %. If you’re trying to borrow $200,000 for a house, that’s a $325 a month hike in your monthly payment compared to the same house price a year ago.

This means your money will buy you less in a traditional housing market and the competition for the Plan B home you’ve settled on still may leave you behind. So, what can you do?

Consider Down Payment Assistance Programs (DPAs)

There are nearly 2,500 programs around the country offering assistance. Every state offers DPAs. Others are run by local government. These programs help home buyers with loans or grants reducing the amount they need for a down payment. Many require you to be a first-time home buyer.

The catch? The rise in mortgage rates might make it difficult to buy that home you had your eye on, even if you can get down payment assistance, especially if your credit score needs a makeover. Real estate experts say it is more important than ever to not only take advantage of traditional assistance programs but also to bring some creative thinking to the process.

Resources and options to make home ownership affordable:

• United States Department of Agriculture assistance and home loan options
• Veteran Affairs (VA) loans available to veterans and service members who qualify
• Good Neighbor Next Door, a program supported by HUD, available to law enforcement officers, teachers (pre-K through 12th grade), firefighters and emergency medical technicians
• Rent-to-own
• Buy a fixer-upper
• Using a cosigner for a better mortgage rate
• House hacking, finding a way to generate income from the home you purchase

The general advice is to look for resources you qualify for AND be open to non-traditional options.

Buyers on a budget should also consider researching alternative housing options, such as mobile, manufactured, modular homes, tiny homes, motorhomes and shipping container homes.

While there are other considerations that may add to the cost of manufactured homes – maintenance, the land they occupy, resale value – the average national price of $81,700 is affordable and a significant savings over the traditional home price, which was $348,079 at the start of 2022. The financing process may be easier for alternative housing than financing a traditional home.

Consider Talking to a Certified Housing Counselor

Inflation has increased the challenges of the housing market, especially for first-time and low-income home buyers. The benefits of pre-purchase housing counseling can’t be overstated. Housing counseling can help in so many areas of home ownership – budgeting, credit score management, and foreclosure prevention. Connect with a housing counselor to learn more about the assistance available to you using our agency finder.

Summary

If you’re not expecting a call from that rich uncle who always liked you more, there are still options. Some of those strategies involve down payment assistance programs and pre-purchase housing counseling. You can also consider an alternative housing market, such as (but not limited to) manufactured homes.

By Mike Leon, Senior Director of Operations at InCharge Debt Solutions