A Knowledge Based User Friendly Approach

How Do You Overcome The Barriers To Homeownership In 2024 And Beyond?

Pleasant Home View

Buyer Issues

By Robert Duplicki      Updated October 30, 2023

Let's start by understanding some relevant history first. While many people bought a home in 2021, and often at the asking price or more, many other people have not been in a good position to make such a purchase.

Our plans and our ability to execute them often are at odds. Even when we look forward with excitement and good preparation, life changes around us.

Nerdwallet published their 2020 Homebuyer Report in January 2020. The article was titled “Optimism Reigns Amid Affordability Challenges.” The survey was conducted by The Harris Poll on behalf of NerdWallet from Jan. 6-8, 2020.

We know how the pandemic changed our lives shortly thereafter and continues to do so.

At the time of the survey 84% of Americans said that buying a home was a priority at that time or in the future. More than 100 million Americans felt better about their ability to buy a home in 2020 than the year before. And 99.3 million planned to do so in the next five years.

Yet among non-homeowners, 42% said their low income was preventing them from buying at that time. And that was at a point in history of very low interest rates.

In January of 2021 Money magazine published an article titled “Qualifying for a Mortgage Is Surprisingly Difficult Right Now.” They stated that “for many Americans it may be near impossible to qualify for a mortgage right now.”

This article referenced the "Housing Credit Availability Index" which is produced by the Urban Institute. This index measures lenders’ tolerance for risk. In the third quarter of 2020 the index was at the lowest level in over twenty years.

Money quoted Laurie Goodman of the Urban Institute: “With the huge volume of refinance loans, originators have less time to work with first-time homebuyers with more marginal credit,” said Goodman. “The result: many renters who could qualify for a mortgage, don’t have the high credit profile required to buy a home at today’s low rates. Thus, they miss out on homeownership, which is the single best way to build wealth.”

Moving forward in time, an article in Investopedia updated as of November 30, 2021 was titled “5 New Barriers to Getting a Mortgage.” Here’s a summary:

  • Lender Paranoia - Lenders want to avoid their past mistakes that lead to the 2008 recession. The secondary market is also taking a more cautious approach to backing lenders. So lenders have a greater responsibility for the loans they originate.

  • Restrictions on Eligible Income - This point and the next one focus on lenders utilizing tighter income verification standards. In particular the difficulty of verifying cash income to current lender standards means more people won’t qualify for bank loans.

  • Tighter Income-Verification Standards - Lenders have less flexibility in this area than in the past. One example applies to loan applicants with a baby on the way. Lenders are concerned about future income.

  • Greater Scrutiny of Credit Reports - Lenders run your credit history at the start of the application process and again right before closing. Be really careful about anything that might reduce your credit score. Even a slight drop in your credit score can disqualify you from the loan.

    I suggest that you develop a strong understanding of your credit history and how your actions impact your credit score. For more input take a look at my article "Have You Checked Their Credit?"

    While that article is geared to note seller's, it is also helpful for home buyers to be familiar with that viewpoint, and the information itself.

  • Uninformed and/or Inexperienced Lenders - The article recommends that you work with an experienced loan officer that understands the current market. Referrals are one resource. Otherwise spend time asking the loan officer questions to evaluate their expertise.

Finally, Education Loan Finance published “Top 5 Barriers to Homeownership for Millennials.” Here they are with my summary:

  • Location & Home Prices - More than any generation in the past, millennials have moved to the biggest cities. Home prices exceed what they can afford and the supply of homes for sale is limited.

  • Starting a Family, - Getting married and starting families later in life has delayed home ownership. The suggestion is to start saving for a down payment ahead of time.

  • Student Loan Debt - Substantial student loan debt increases debt-to-income ratios, and lowers the appetite to take on more debt.

    According to the Consumer Financial Protection Bureau, "Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow."

  • Rental Costs - The ongoing rise in rents delays saving for a home purchase. So if you want to buy a home, make the commitment and find a way to save.

  • Poor Credit Score - The average credit score for millennials is 640. This is lower than other generations and below the median score for obtaining a mortgage. As mentioned above, I suggest that you develop a strong understanding of your credit history and how your actions impact your credit score.

So What’s The Answer?

How about lower expectations, buying a 2-4 unit property instead of a single family home, and using seller financing?

There can be many deterrents to purchasing a home. All the data that I mentioned above can be overwhelming. Now we are facing higher interest rates. And so much of what you will find in the media piles onto the overwhelm.

My intent is not to disrespect the service provided by the media. But they do have lots of content requirements to fill online, in newspapers and magazines and on television and radio. So all this volume and analysis can lead to making a big deal out of things and discourage us.

United States 30-Year Mortgage Rate 1971-2023
Graph Of United States 30-Year Mortgage Rate 1971-2023

Despite all the details presented in the data, millions of homes are purchased every year. And look at the graph above. The 30-Year Mortgage Rate shows the interest rate in the U.S. from 1971 to 2023. During this time period the highest rate was 18.63 and the lowest was 2.65. The average rate on a 30-year fixed mortgage was at 7.63% as of October 19th, 2023. The graph clarifies that the current rate is not out of the norm. And people are somewhat mislead by the low interest rates we just experienced. Once again look at the graph and see how these low rates were an exception over the past 50 plus years.

To start on the journey to home ownership, could you lower your expectations of what you need in the meanwhile? Lessening immediate gratification in pursuit of long term goals has proven successful throughout history.

When choosing an apartment, that’s a great time to reduce a substantial percentage of one’s monthly expenses. How much of the amenities included in higher priced properties are needed? Likewise, how nice do the furnishings need to be? Could you take a more frugal approach to other aspects of your life?

Continuing with this line of thought, how are you spending your time as you enjoy various distractions? As an alternative, how might you increase your income?

For those who are compelled to move to the biggest cities, how realistic is it that doing so is a cost effective approach in the long run?

Multiunit Home

Advantages Of A 2-4 Unit Home

Two to four family homes come in a variety of shapes and sizes. I’m not going to try and cover the different structures across the country. So my terminology may not reflect what you are used to.

Yet the concept does apply wherever you can make it work for you. Income from the other units besides the one you occupy, will provide income that allows you to purchase a home, when you wouldn’t qualify for single family financing.

Picture a 2-4 unit home in a neighborhood mixed in with others of that size, and single family homes as well. You might even be renting a unit in such an environment.

Your immediate vision of this idea might be positive or negative, depending on your experiences to date. This idea probably hasn’t gotten you excited in the past. On the other hand you may have thought about investing in real estate some day. Perhaps as an owner of rental property or as a flipper.

Why not combine ideas of home ownership with real estate investing. This could be an excellent way to start pursuing both dreams. For starters let’s focus on using this idea to become a homeowner sooner than you thought you could afford to.

If you haven’t considered this option before, it immediately increases the pool of available properties for sale. Now if you allow yourself to also start thinking like a real estate investor, realize that everything is for sale at the right price. That doesn’t mean that you have to overpay. Buying right is a key investor concept. That is, you make your money when you buy, rather than when you sell.

To continue that line of thinking, the property doesn’t have to be listed for sale in order for you to make an offer to buy it. One way to follow through on this is to make offers on properties that have units for rent. This gives you a resource to evaluate and a way to connect with owners.

The contact person for the rental listing might not be the owner nor be willing to provide the owner’s contact information. So that is just one detail that real estate investors solve. It’s called work. If you really want to become a homeowner, allow yourself to do what’s necessary.

How you find the right property is not critical to purchasing a 2-4 unit home. There are many ways. The key point here is that this type of property could help you become a homeowner sooner, and increase your wealth in the long run.

Of course you don’t have to live in the 2-4 unit indefinitely. At this point that might be the little reminder you need to get past the idea that you don’t want to do this. Would you rather keep paying rent or start receiving rent payments? Ultimately you may sell this property in order to buy a single, or your improved finances may allow you to buy a single family home, and keep the 2-4 unit as an investment.

Homeownership Helps Build Wealth

I’ll start by repeating a portion of the quote from above by Laurie Goodman of the Urban Institute. “...many renters who could qualify for a mortgage, don’t have the high credit profile required to buy a home at today’s low rates. Thus, they miss out on homeownership, which is the single best way to build wealth.”

There are many opinions on how to build wealth. And renting an apartment has advantages and disadvantages compared to homeownership. But owning real estate has been common among the wealthy.

Of course being wealthy and building wealth can be far apart. Goodman is referring not to the wealthy, but the overall wealth of the typical homeowner. Historically, in the long run owning a home has represented a significant portion of individual and family wealth.

If you are paying rent, that process in and of itself is not building wealth for you. You are contributing to the potential wealth of the property owner. Once again, would you rather be paying rent, or having others pay rent to you?

Goodman was also referencing the huge volume of loan and refinance opportunities that lenders had been receiving. So potential buyers with marginal credit were less likely to fit in the schedule of bankers. They have had too many better opportunities in recent times.

Looking ahead, keep in mind that buying a home takes on additional responsibilities. And there are more as a landlord. So be prepared. There are many resources available to help you. One of those is Mrlandlord.com.

Also, many communities across the country have local real estate investment organizations. The initials REIA stand for Real Estate Investors Association. At the website for the National REIA you can find local associations at this link: https://nationalreia.org/find-a-reia/. If you don't find a local group there, keep searching.

Pride Of Ownership

As you look forward to home ownership and consider the options around you, have you thought about pride of ownership? The concept may have been important to your family as you were growing up. Or your experience may have been quite different.

“Pride of ownership” shows that the owners have made a substantial effort to take care of their home. That’s often not easy and can change as our lives change.

A common observation is that owners take better care of their own property than others will. This can be a touchy subject. But I suggest that when you become a homeowner you will feel differently about your property than you do as a renter. And bear in mind that landlords and tenants often think differently about all sorts of things.

Meanwhile, as you are renting, who else do you know nearby who is renting? Any family members? Friends? If you take the step to purchase a 2-4 unit property, would you like to take the opportunity to rent one or more units to people that you know?

There’s a chance here to produce a multi-win situation. And there’s a further opportunity to magnify pride in ownership. With you as the owner, and additional family members working together to maintain and improve the property.

Seller Financing

Considering the issues covered so far, seller financing could be your difference maker to overcome the barriers to home ownership.

Seller financing, also known as owner financing, means that the seller will take payments directly from the buyer, to pay for the purchase of an asset over a period of time. This process is used in the sale of residential and commercial real estate, businesses and other assets.

While the word loan is used as part of seller financing, the seller is not loaning money to the buyer. Typically the buyer makes a down payment, and the remainder of the purchase price is paid in a series of payments over time. The actual structure of payment takes a variety of forms as agreed upon by buyer and seller.

When seller financing pertains to a real estate transaction, the legal documents used are a note and mortgage. The note is a secured promissory note, or a promise to pay, and includes the financial terms of the sale. A mortgage or deed of trust is the security instrument. It’s the legal document identifying the property as the security for the note.

You can learn more about seller financing throughout this website. While the page titles and subject headings cover a number of topics, they all have some connection to seller financing.

Similar to seller financing, a note and mortgage are documents used in bank financing as well. The concepts apply throughout the U.S. while some of the terminology varies.

Likewise, both bank notes and seller financed notes are assets that are regularly sold and purchased as investments.

This website is the basis for a service when a note holder wants to sell a note. So if you obtain seller financing, the seller of the property can sell the future payments for cash. That process will not change the terms of your note. Only who you send your payments to will change. But it does provide another incentive for property owners to provide seller financing.

Much of what you will read at this website tends to be geared to creating and selling notes. There is more emphasis on the perspective of the property seller or business seller, who becomes a note seller. But notes of this type don’t get created without buyers of real estate and businesses.

As you consider your options to purchase a home, keep in mind how you fit in the equation of creating and selling notes. As a home buyer, your focus should be on how seller financing can help you reach that goal.

Letter Of Intent

A letter of intent is a document that can be used for multiple purposes depending upon how it is written. For the sale of property or a business, a letter of intent can present an initial offer to purchase. It may be the way to start negotiations.

Letters of intent are more common and more detailed for commercial property than residential. In a more simplified form, they give the prospective home buyer a way to contact the owner and indicate their interest to purchase the property. Or if you have already started to negotiate, use the letter of intent to confirm your intentions.

A letter of intent can be a helpful tool for the home buyer who has contacted the seller directly. This is also a means to pursue seller financing. Take a look at the letter of intent below to better understand one possible format.

Residential Letter of Intent

NB: This is an image not a PDF. Click here for your own free PDF. It's a sample that you can use as is, or modify. It’s best to review it with your attorney.

Letters of intent can be considered binding or non-binding agreements. A short and simple approach to a letter of intent tends toward the non-binding side. It can also be written with the intent that a portion is binding. Then it should be stated as such.

The buyer should sign the letter of intent before giving it to the seller. The buyer’s desire is for the seller to sign and return the letter of intent to indicate a willingness to continue the process.

Be prepared for a counter offer and perhaps a sequence of these before a final agreement is reached. That is the time to transfer the details to a formal Purchase And Sale Agreement.

Here are more ideas to help you overcome the barriers to home ownership:

Fannie Mae Is On Your Side

In there own words "We serve homebuyers, homeowners, and renters by creating solutions that expand equitable access to affordable housing. As a resource for homeowners and renters, we also provide reliable information to educate and empower you in your housing decisions."

Fannie Mae (FNMA) purchases mortgages from lenders, including banks, thrifts, and credit unions, so that the lenders can use that money to make other mortgage loans. For example, "In 2022, Fannie Mae enabled the financing of approximately 2.6 million home purchases, refinancings, and rental units."

Of course Fannie Mae has specific prrograms that lenders follow. Based on the parameters of these programs, lenders can determine the types of financing they can provide, for which Fannie Mae will consider purchasing the loans.

It follows that the changes Fannie Mae makes to their programs are important to lenders, and can have a major impact on the financing available to consumers. Positive changes can make housing more affordable or add more capital to financial markets.

Such a positive change is underway. Effective after November 17, 2023. for principal residences, Fannie Mae has reduced their down payment requirements. For purchase and limited cash-out refinance the down payment requirement are being reduced to 5% for 2-4 unit properties. The current down payment requirement is 15% for 2 units and 25% for 3-4 units.

Similar changes have been approved for the Fannie Mae HomeReady and HomeStyle Renovation programs. The HomeStyle Renovation program provides financing for purchase or refinance of a new or existing home, including funds for renovation. The HomeReady program has lower rates and cancellable mortgage insurance, and can be combined with the HomeStyle Renovation program. Of course program restrictions apply.

Federal Housing Administration (FHA) Update

The Federal Housing Administration serves various roles. The one pertinent to this article is that they insure various mortgage programs provided by approved lenders. This process gives the lenders more confidence to offer affordable mortgages to meet specific borrower needs. For these mortgages, FHA determines the requirements for borrower approval.

According to a release dated October 16, 2023, the FHA has expanded access to homes that have or will include Accessory Dwelling Units (ADU).

Accessory Dwelling Units are small units of housing built inside, attached to, or on the same property as a primary residence. Under the new policy, FHA will allow lenders to count income from accessory dwelling units when they underwrite a mortgage.

This is similar to the idea that a 2-4 unit property could make home ownership affordable for you. The difference for starters is that the new FHA policy applies to their FHA Single Family Title II mortgage, and the Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage. So rather than looking for a 2-4 unit property, you could be looking for a single family home, with an ADU that also produces rental income.

"FHA programs currently allow for the purchase, rehabilitation, or refinance of Properties that include a single ADU. FHA does not, however, presently allow for the inclusion of income from the ADU in the Borrower’s Effective Income for purposes of qualifying for an FHA-insured Mortgage."

So a key idea remains that you find ways to improve your income, to make home ownership more affordable. What will work for you? It may take longer then you want, but rather than give up, consider a long-term plan. By planning ahead and taking action, you will be better prepared to take advantage of program changes like these being made by Fannie Mae and FHA.

For more information about this FHA update, here is the mortgage letter from FHA.

For more information about Accessory Dwelling Units, here is a link to a comprehensive resource at AARP.

Reverse Mortgage Alternatives

Did you notice that the FHA changes discussed above mention reverse mortgages? I will not cover reverse mortgages in detail, but here are some related ideas to affordable home owvership.

A typical mortgage is known as a forward mortgage, but the word forward is often not used. A reverse mortgage is an option if you already own a home and have substantial equity in it. The reverse mortgage allows the home owners age 62 and over to receive cash in a lump sum and/or monthly payments, So the owner is not making mortgage payments. Instead they are using the equity in their property to receive payments.

Upon the death of the last surviving owner, the reverse mortgage needs to be paid off. This may require the sale of the property. Until then this process allows some people a way to stay in their home and pay the bills as they age. So this tool makes home ownership affordable for those that qualify.

For home owners who utilize a reverse mortgage, the FHA update above allows the home owner to add an Accessory Dwelling Unit to their home. This may provide a temporary option for a relative, as they prepare for home ownership in the future. This alternative may facilitate a caregiver to live at the same address as the homeowner, while having their own unit.

Looking ahead, as we manage multigenerational needs, adult children and other relatives will assist aging parents, some of which age in place at home. This may involve the relative living at the home, with or without an ADU. If there is a reverse mortgage on that property, a new challenge develops at the death of the last surviving ower. For example a son or daughter living there may inherit the home. But the reverse mortgage needs to be paid off. If you are the person that inherits the home, will you be prepared to buy the home if you want to stay there?

At such a point in time there are many possible financial scenarios. Selling the property is one method to pay off the reverse mortgage. If an heir wants to live at the home moving forward, HUD will allow purchase of the home for 95% of the appraised value, as satisfaction of the reverse mortgage. So depending on your personal circumstances, and how they may evolve over time, this process is another way to afford home ownership.

One more alternative to affordable home ownership that meets multigenerational needs, is having a younger family member purchase a single family home, and add an ADU for an older family member. The older family member may or may not own a home at that time. They may not find a reverse mortgage as a favorable option. Once again there are many possibilties to the financial details involved for all related parties. The new HUD update may enhance this option for you.

203k Rehab Mortgage Insurance

One more improvement available through the HUD program changes pertains to their 203k mortgage. HUD is actually insuring this mortgage provided by one of their approved lenders. "Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home."  Here is a summary of the program before adding the new enhancements: 203(K) REHAB MORTGAGE INSURANCE.

The first enhancement that applies to the 203k mortgage is allowing rental income from Accessory Dwelling Units to apply. So ADU rental income is added to the borrower’s effective income used in qualifying for this mortgage.

Also, the types of improvements that qualidy for 203k have been expanded to include converting a one-family structure to a one-family structure with an ADU, adding an ADU) that will be attached to an existing structure; and renovating an existing ADU that is attached or unattached to an existing structure.

Make An Offer

Whether you use a letter of intent or any other approach, in order to buy your home you need to make an offer. Before you do so, make sure that you have a clear picture of what you can afford.

No matter how you finance your home, you will need to consider the purchase price, down payment, interest rate, the number of payments, and the amount of monthly payments that you can afford.

Some of the terminology can get confusing, but in the paragraph above, all the factors other than price are referred to as “terms.” A related real estate concept is “price or terms.” The idea being you can negotiate better terms with a higher price, or with a lower price the terms may favor the seller.

If seller financing is involved, this will give you more flexibility to negotiate a deal. “Price or terms” becomes less of an opportunity the greater the percentage of bank financing involved. So if you have limited income, marginal credit and/or are looking at a lower price range, it will help a lot to find a motivated seller.

A motivated seller will have reasons for their motivation. It will help you to discover them. While the motivation involved may make the property less appealing to a banker, this could be just the situation you need to make a deal.

I hope you find the home that you are looking for!

If you know anyone who wants to sell a secured promissory note, please send them my way.


  1. Photos by Ian MacDonald and David Vives on Unsplash
  2. NerdWallet 2020 Home Buyer Report, "Optimism Reigns Amid Affordability Challenges," https://www.nerdwallet.com/blog/2020-home-buyer-report/
  3. Money, "Qualifying For A Mortgage Is Surprisingly Difficult Right Now" by Leslie Cook, January 14, 2021, https://money.com/mortgages-hard-to-qualify-2021/
  4. Investopedia, "5 New Barriers To Getting A Mortgage," by Amy Fontinelle, updated November 30, 2021, https://www.investopedia.com/financial-edge/0810/5-new-barriers-to-getting-a-mortgage.aspx
  5. Education Loan Finance, "Top 5 Barriers To Home Ownership For Millennials," updated May 14, 2020, https://www.elfi.com/top-5-barriers-to-home-ownership-for-millennials/
  6. Consumer Financial Protection Bureau, "What Is A Debt-To-Income Ratio? Why Is The 43% Debt-To-Income Ratio Important?, Last Reviewed November 15, 2019, https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-why-is-the-43-debt-to-income-ratio-important-en-1791/#:~:text=Your%20debt%2Dto%2Dincome%20ratio,money%20you%20plan%20to%20borrow.
  7. Trading Economics United States 30-Year Mortgage Rate.
  8. Fannie Mae, Desktop Underwriter/Desktop Originator Release Notes, Oct. 4, 2023; Updated Oct. 25, 2023.
  9. U.S. Department Of Housing And Urban Development, Mortgagee Letter 2023-17, October 16, 2023.
  10. U.S. Department Of Housing And Urban Development, 203(K) REHAB MORTGAGE INSURANCE.


To Expedite Your Results Please Complete A Worksheet

For your security all worksheets are encrypted. This gives you the most effective protection for your data, and protects your privacy.