Fewer people can afford to buy a house these days.

On top of soaring home prices, 30-year fixed mortgage rates have been hovering near the highest level in more than two decades.

For some buyers, that leaves just one option: asking their parents for help.

Buyers turn to the bank of mom and dad
First-time buyers cobble together down payment sources from at least two places.

Some of that is hard-won saving. The other part is, say, a gift from family and friends.

In fact, roughly 40% tap the bank of mom and dad, up from only one-third pre-pandemic, Zillow found.

Would-be homebuyers need a salary of $114,627 to afford a median-priced house in the U.S., according to another report by real estate site Redfin, a particularly high bar for those just starting out.

To bridge the gap, a growing share of younger house hunters are now considered “nepo-homebuyers,” because they rely on family money to complete their purchase, the Redfin report said.

Nearly 40% of recent homebuyers under age 30 used either a cash gift from a family member or an inheritance to afford their down payment, Redfin also found.

Home affordability is a growing problem
In fact, housing is far less affordable today than in any time in recent history, several studies show.

Over the past 35 years, the payment-to-income ratio — a commonly used measure of the share of median income it takes to make the monthly principal and interest payment on the median home with a 30-year mortgage and 20% down — has averaged less than 25%, according to data from ICE Mortgage Technology.

At its peak in 2006 before the crash, the payment-to-income ratio was 34%. In late 2023, the payment-to-income ratio is 40%.

Often, it’s the down payment that seems particularly daunting.

However, there are options. While a 20% down payment is still considered the standard, the federal government, states, banks and credit unions all offer programs with much lower down payment requirements, or even none at all.

Keep in mind that many lenders and specific loan options, like FHA mortgages, don’t necessarily require particularly large down payments.

Call us at (480) 205 2234 to get more information on such mortgages and current rates.