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Saving enough money to purchase a home has always been tough for younger buyers, but rising prices and higher interest rates have made it especially difficult for Gen Z (those born from the mid-to-late 1990s and the early 2010s) to get their foot in the door of the housing market.

As they wait on the sidelines for the chance to buy their first property, many are feeling real estate FOMO, which is the fear that they’re missing out on a major life milestone and the opportunity to build the wealth that others have managed to build. Let’s take a look at some of the obstacles Gen Z is facing and the steps that could help as you save and search for a home.

What Does FOMO Mean?

FOMO, or fear of missing out, is a term used to describe the feeling that you aren’t being included in something others are experiencing. Maybe they’re achieving goals that you haven’t yet reached or doing things that you currently don’t have the resources (financial or otherwise) to do. FOMO is often used to describe missing out on a social event, such as a concert or a party, that you weren’t invited to. But it can also mean wanting things that others in your social circle have, including a better car, clothes, trips, or jewelry.

FOMO spending is when the fear of missing out pushes you to spend money — maybe more than you should — to keep up with your peers. Older generations often refer to this as “keeping up with the Joneses.” Real estate FOMO can have that effect. It might lead someone to buy a house before they’re ready to or to take out a mortgage loan on a house they can’t comfortably afford. But it can also make homebuyers reluctant to commit to a purchase if they think they’ll find a better home at a better price if they just wait a while. And for some Gen Zers, social media can exacerbate those feelings.

How to Deal With FOMO in Real Estate

There are a few different things you may want to consider if you think FOMO is getting in the way of making smart home-buying decisions.

If You Feel You Need a Reality Check…

It never hurts to revisit your budget to see how much house you can truly afford. Using a home affordability calculator can help you set some limits. It also may be useful to talk to a financial advisor about how buying a home, or a home at a particular price, could affect your other goals. If you see a property you’re interested in purchasing, run the numbers in a mortgage calculator to get a sense of what your monthly payments would be.

If You Find Yourself Trying to “Time the Market”…

It can be tough to predict when home prices or interest rates will go down. Instead, you might want to talk to a real estate agent about the best time of year to look for housing bargains in your area, or you could shift your search from a pricey “hot” area to one with a more affordable cost of living. Also, if you find a home you think you’ll stay in long-term, you may want to keep mortgage refinancing in mind as an option for lowering costs in the future.

If You’re Feeling Triggered by What Others Have…

Looking at too many listings, home improvement shows, or friends’ house-proud social media posts may not help you understand the market you’re looking at and could lead you away from your personal must-haves. When that happens, it helps to take a break (perhaps from social media) to reprioritize and get back on track.

What Are the Barriers for Gen Z Home Buyers?

Some of the obstacles Gen Z homebuyers face are the same ones that would-be homeowners have encountered off and on for generations. Home prices are high and continuing to rise. Housing inventory is growing slowly but needs to outpace demand to limit price increases. And though mortgage interest rates are cooling and inflation is remaining steadily lower after the post-pandemic spike, gas, groceries, and other costs are still taking a toll on household budgets.,

However, Gen Z has bigger issues to contend with than previous generations, including:

Down Payment Costs

Down payments are calculated as a percentage of the home price, so higher-priced houses usually require larger down payments, making it increasingly difficult to get into the housing market. First-time homebuyers typically put down less than repeat buyers — about 10% compared to 23%, according to the National Association of Realtors. That could still be a hefty amount to come up with, considering that in February 2026, the median home price in the U.S. was nearly $430,000.

Student Loan Debt

A college education may help Gen Z graduates earn higher salaries, but many report that student debt is slowing their progress toward certain milestones, including buying a home. Those college loans can make it even more difficult for younger buyers to save for a down payment or make higher monthly mortgage payments. You can afford a mortgage if you have student loans, but student debt can factor into your debt-to-income ratio (DTI), which may affect whether or not you qualify for a mortgage and the interest rate you’re offered.

Higher Rent Payments

Rising rental costs are another factor that may be affecting Gen Z’s ability to save for a home. According to Zillow’s monthly Observed Rent Index, the typical U.S. rent in January 2026 was $1,895, a 1.9% year-on-year increase.

Adulting = Insecurity

Navigating life after college with a new (or new-ish) career, bills to pay, and uncertainty about where life might take you next (a new job, a new town, a new partner, a new baby?) can be daunting enough without the home-buying headaches. While some Gen Zers have found a way into the housing market despite the barriers, others are waiting until their careers and finances feel more stable.

How Does Gen Z Approach Home Buying?

Although buying a home may not be as significantly linked to achieving success as it was for older generations. According to a 2025 Realtor.com survey, 67% of Gen Z respondents said that they see homeownership as an important lifetime goal, and 69% agree that real estate is an opportunity to generate wealth. And they are finding ways to make it happen. By cobuying with friends, moving to a state with a lower cost of living, using cash gifts from family, or living with their parents after college to save money, Gen Zers are entering the housing market.

Where Is Gen Z Buying Homes?

As you might expect, Gen Zers who live in, or are willing to move to, more affordable locations, such as the South and Midwest, are more likely to buy homes than those looking to live in upmarket coastal cities that carry higher price tags.

In March 2025, Realtor.com listed Des Moines, IA, Omaha, NE, Youngstown, OH, Dayton, OH, Grand Rapids, MI, Little Rock, AR, Birmingham, AL, Cincinnati, MS, Jackson, MS, and Wichita, KS, as the 10 metropolitan areas with the largest percentage of Gen Z buyers. As per Redfin, in February 2026, median house prices in these cities ranged from $134,500 to $285,000, well below the U.S. median of $429,708.

Recommended: Best Affordable Places to Live in the US

Is It Harder for Gen Z to Buy a House?

Gen Zers aren’t facing the double-digit mortgage rates their parents and grandparents faced in the early 1980s. Nor are they trying to buy homes during a depression or a recession. Still, thanks to inflation, low inventory (partly caused by affordable homes being snapped up by investment companies), and other factors, this is a challenging time to become a homeowner.

According to Redfin, 38.3% of 28-year-olds owned their home in 2025. That homeownership rate is lower than that of Gen Xers (42.5%) and baby boomers (32%) when they were 28. But it’s a bit higher than the rate of 36.8% for millennials when they were the same age.

Steps for Gen Z Home Buyers to Consider

For Gen Z, patience, flexibility, and creativity may be the keys to success in today’s tough housing market. Here are some steps to consider as you pursue homeownership:

Know Before You Go

The more you know about the home-buying process, the more confident you can feel about the decisions you make. Get to know the first steps you should take (such as improving your credit score, lowering your DTI ratio, and researching first-time homebuyer programs and loans). And as you start your home search, consider listing your wants vs. your needs, learning about the different types of mortgage loans, and completing the mortgage preapproval process.

Keep Expectations in Check

Here’s where FOMO can really get in your way: The house you can afford may not be anything close to the designer houses you see on social media and TV. But an affordable starter home can be a stepping stone to the home of your dreams. If you aren’t sure what you can manage, talk to a professional, such as your financial advisor, a real estate agent, or a mortgage professional.

Cast a Wide Net

If you can’t afford the trendiest neighborhood or a house directly on the beach, you may want to try searching in similar or nearby areas. If you can relocate, you could broaden your search, looking at states that have what you want but at a lower price.

Recommended:Home Loan Help Center

The Takeaway

If high housing costs and other factors are getting in the way of your plans to buy a home, and you feel a strong sense of FOMO creeping up on you, try not to get sucked into overspending or abandoning homeownership altogether. Staying true to your budget and goals and getting some assistance in finding the right home and home loan can help you avoid feeling pressured into making bad decisions.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What does FOMO mean in real estate?

The fear of missing out (FOMO) in real estate is the worry that you aren’t where you should be when it comes to homeownership. It may be because you haven’t yet purchased a home, or you notice differences between your home and the places you see others in your peer group moving into.

Which housing markets are dropping the fastest?

According to Cotality’s U.S. Home Price Insights report from February 2026, Florida’s Cape Coral, Lakeland, North Port, Palm Bay, and West Palm Beach are likely to experience price drops this year. The most affordable areas are Johnstown, PA, Albany, GA, Decatur, IL, Joplin, MO, and Weirton, WV.

What is the slowest month for the housing market?

Winter is typically the slowest time of year for the housing market, while spring and summer are the busiest seasons. Cold weather, the holiday season, and the start of the school year often see fewer home listings and fewer people attending showings, contributing to the seasonal slowdown.

How can Gen Z save for a down payment faster?

Strategies for faster saving include setting up automated savings deposits, keeping your savings in a high-yield account, taking on a side hustle, and reducing expenses by living with parents or roommates. As down payments are calculated as a percentage of the sale price, moving to an area with lower house prices can mean that you reach the amount you need faster.

Should I wait to buy a home if prices are high?

Timing the market is difficult. Focusing on your personal finances, affordability, and long-term goals is usually a safer approach than waiting for prices to drop.

Photo credit: iStock/gradyreese

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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SOHL-Q126-127

Perhaps the idea of homeownership sounds appealing, but the thought of all the maintenance involved — inside and outside — not so much. Dealing with snow removal or tending to your lawn might be the last thing you want to add to your already full plate.

If that resonates, buying a home that has a homeowners association, or HOA, might be the right move. Whether you’re shopping for a condo or a three-bedroom house in a new development, an HOA could be a valuable thing. These organizations, funded by dues, take care of many of those maintenance responsibilities, run shared facilities (such as a pool), and create guidelines (and enforce them) for the community of homeowners.

That said, interacting with an HOA and following its guidelines may not be for everyone. Read on to learn:

•   What is an HOA

•   How do HOAs work

•   How much are HOA dues

•   What are the pros and cons of HOAs

•   How HOA fees impact your costs as a homeowner

What Is an HOA (Homeowners Association)?

An HOA is typically a nonprofit volunteer group that manages aspects of homeownership in certain planned unit developments, condos, and other housing communities. The HOA collects fees from each member of the community and uses them to handle maintenance duties and amenities. These may include:

•   Landscaping and maintenance of walkways and the like

•   Pest control

•   Maintenance and utilities for shared spaces, such as lounges and pool areas

•   Garbage pickup

•   Parking

•   Security

Another answer to “What is an HOA?” is that these associations typically enforce rules about the look and feel of the community. There may be guidelines about the size of pets community members are allowed to own or the color schemes permissible for a townhome’s exterior. The existence of an HOA is an important consideration when you’re shopping for a place to live, and HOA fees need to be built into a homebuyer’s financial plan, just like home loan payments.

Recommended: Condo vs Townhouse: 9 Major Differences

How Does an HOA Work?

HOAs can be staffed in different ways. They can be run by people owning property within its boundaries, run by a board of directors, or through a similar arrangement, with board designees elected to oversee and enforce HOA rules.

Many HOAs are incorporated, which makes them subject to the laws of the state and may require them to file annual reports with the corporation commission to remain in good standing.

People who purchase properties within an HOA jurisdiction become members of that organization, and they must abide by the rules contained within that organization’s bylaws and Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

HOA rules, fees, and restrictions vary. Some bylaws and CC&Rs are strict, while others are looser, typically focusing on how residents should maintain properties according to the stated specifications. In a planned unit subdivision of single-family homes, for example, rules may include the types of landscaping that are permitted, exterior paint colors that can be used, and the kinds of fencing designs that are allowed.

They can include the rules of using common property, such as a pool, and typically outline penalties for rule violations, ranging from forcing a homeowner to comply with fees to potential litigation.

How Common Are HOAs?

Here are some recent statistics that will help you get an idea of how common HOAs currently are in the U.S.:

•   Approximately 76.5 million Americans live in HOAs, cooperatives, or condominium units.

•   53% of all U.S. homeowners live in HOA communities.

•   28.2 million housing units in America are part of HOA communities.

As you can see, HOAs are quite popular.

What Is an HOA Fee?

Now that you know a bit about what an HOA is, let’s look at the fees they charge. People who buy property in an HOA-governed condo or community usually must pay HOA fees — typically on a monthly basis. These fees help maintain common areas of buildings, such as lobbies and patios, and perhaps community clubhouses. These fees can cover maintenance on elevators or swimming pools, if applicable, or they could be used for landscaping expenses, for example. Additional special assessments may be charged for major repairs, such as roof replacement.

Some studies suggest that average HOA fees range from $200 to $300 per month, although they can be as low as $100 and as high as $1,000 or more. It depends on the HOA complex, where it is, what amenities the project maintains, and sometimes on how the individual HOA is managed.

The most important thing when shopping for a new home is knowing what fees will be assessed on your individual unit and whether that fits your budget.

Considering an HOA Property

When considering whether or not to buy a property within an HOA, it makes sense to evaluate what you’d be committing to.

To get an understanding of how the organization operates, you can ask the board of directors if you could read minutes from meetings — if you have a real estate agent, they should be able to help you access records. This may give you a good overview of any challenges the organization is facing and insights into how solutions are brainstormed and implemented.

Things to look into can include:

•   What are the HOA fees each month? What do they cover?

•   If the fees seem low, are enough funds collected to maintain general areas? What about meeting rooms, the gym, the pool area, and so forth?

•   If the HOA fees are higher than expected, do they seem excessive for what you’d get in return?

•   Are homeowners also being charged special assessments to cover other costs? If so, how often, and what are they?

•   How many units are not paying their HOA fees? What are the consequences for that? Are penalties being imposed?

•   If certain units don’t pay their HOA fees, how does this affect other homeowners?

•   Would you be allowed to sublet your unit? Over what term and with what restrictions?

•   Are you allowed to have a pet? If so, what restrictions exist? Ask to read a copy of the CC&Rs, which is recorded public information.

•   Does pending litigation exist against the HOA? If so, what type? Does it involve damage to one unit, or does it affect the entire organization?

If you have friends or family members who are part of this HOA, consider asking them what they like about living there and what they don’t. If you have a friend or family member who owns housing under a different HOA, chat with them as well. Their insights into what questions to ask and issues to explore before buying can be valuable.

You can also review the bylaws, which usually state the voting rights of members, budget and assessment rules, meeting requirements, and other details. Check to see what actions can be taken without a member vote — if they include raising assessments or creating rules, this could have an impact on your buying decision.

Pros vs Cons of HOAs

There are several benefits of buying a property that’s part of an HOA

•  Guidelines to help maintain the look of the community, settle issues, and create harmony among residents

•  Enhanced quality of life and property values

•  Maintenance services so homeowners don’t need to do the work themselves or hire freelance help

That said, there are also possible drawbacks to being part of an HOA.

•  HOA fees that can be prohibitively expensive, and the possibility of special assessments being financially challenging

•  Potentially restrictive guidelines that inhibit your freedom over your property (such as not being allowed to have a certain kind of pet or install solar panels)

•  Volunteers running the HOA vs. skilled real estate professionals, which could lead to inefficiencies

Can You Afford to Buy Into an HOA?

When shopping for a new home or condo, one key consideration is how much you can afford for a house — with the true cost being more than just principal, interest, and homeowners insurance. If you are considering properties that have HOA charges, it’s vital to factor those in to make sure your budget is manageable.

You’ll need a down payment on the home. There are also property taxes, insurance, and closing costs (which can run from 3% to 5% of the home’s cost, paid by the buyer and/or seller according to the contract). And there are expenses other than closing costs, such as moving expenses and furniture, that should be considered as you grapple with how much you can afford.

Plus, you might want to have an emergency fund established for unexpected expenses, whether that’s unanticipated housing repairs, medical expenses, or something else entirely.

To help you figure out that affordable house payment number, check out our mortgage calculator.

What to Know About Mortgages and HOAs

There’s one more factor to consider when thinking about whether to buy into an HOA: the impact it may have on securing your mortgage.

When you buy a property that is part of an HOA, you may need additional documentation for your lender. If your bid is accepted, the lender will likely request an HOA certification (an HOA cert for short). This document provides your lender with a snapshot of how the HOA is being run and may include information about:

•   How old the project is

•   Whether a condominium development was converted from an apartment building or specifically built as condo units

•   How many units exist in the project

•   How many units are occupied

•   How many units are owner-occupied, and how many are rented to someone else

•   How much HOA fees are

•   The amount of insurance on the project

If this information is requested, it will likely be reviewed to confirm that this property meets the lender’s loan eligibility guidelines. Because guidelines can vary from lender to lender and between loan programs, it makes sense to check with your chosen lender as soon as possible.

The HOA cert may also be obtained by the escrow/title company and provided to your lender, along with the relevant CC&Rs. This provides insight into any property restrictions and other aspects that may affect a home’s lendability and marketability.

Recommended: Home Loan vs Mortgage: What You Should Know

The Takeaway

Homeowners Associations (HOAs) are organizations that manage common areas, maintenance, and enforce community rules within planned developments and condos. As a homebuyer, you must factor the required monthly HOA fees and potential special assessments into your budget, as these costs and the association’s financial status can impact your mortgage application. It’s important to weigh the benefits of common area upkeep against the potential drawbacks of restrictive guidelines and the financial commitment before you purchase a property in an HOA.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Why do HOAs exist?

Homeowners associations exist to manage and maintain common areas, enforce community rules, and collect and manage the finances used for community upkeep. Many people who participate in HOAs expect the association to help enhance their property values.

How much are HOA fees?

HOA fees vary widely based on the amenities offered by the development. In general, most people can expect to pay at least $200 to $300 per month.

Can an HOA affect my mortgage application?

Your lender will likely request documentation about the HOA from the association to learn details of the building, how it’s insured, and the financial status of the HOA. It’s also important to factor HOA fees into your monthly housing budget.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q126-134

Canceling a credit card might seem like a good idea if you’re trying to get debt under control or you want to consolidate your cards. But closing a credit account can do more harm than good and damage your credit standing. Here’s what you need to know before you take action, plus some other strategies you may want to consider instead.

Understanding the Impact of Credit Utilization Ratio

To understand why canceling a credit card can hurt your credit score, you need to know about something called the credit utilization ratio. This is the ratio of your total credit to your total debt.

Another way to think of it is how much of your available credit you’re using. For instance, if you have two credit cards with a total credit line of $20,000 and you use $5,000 of that, your credit card utilization ratio would be 25%. In addition to credit cards, your credit utilization ratio can also include home equity lines of credit.

Your credit utilization ratio directly affects your credit score. In fact, it accounts for 30% of your FICO® score. Your credit utilization ratio is the second-most important factor in your credit score (payment history being number one). Ideally, lenders prefer a person’s credit utilization ratio to be below 30%.

When you cancel a credit card, you reduce your available credit. This can cause your credit utilization ratio to jump up, especially if you owe money on other credit cards, and can negatively impact your credit score.

Reasons to Cancel a Credit Card

Several factors may motivate you to want to cancel a credit card, including:

•   Too much debt: Perhaps having the card on hand is causing you to overspend and take on even more debt. If canceling the card will help you manage your finances better and get your debt under control, it can be a good option.

•   A high annual fee: If the card’s fee is high and you aren’t taking advantage of any of the perks, like travel rewards, to offset it, you may want to find a card that’s a better fit.

•   Too many cards: If multiple credit cards are causing you stress and missed payments, then having fewer cards might help lighten the load. (A budget planner app can help you spot upcoming bills and manage bill paying.)

How to Cancel a Credit Card

If, after considering the pros and cons, you’ve decided to go ahead and cancel the credit card, here’s how to do it:

1.   Pay off the remaining balance on the card, or transfer the balance to another credit card.

2.   Contact the credit card company, preferably by phone. Some credit card companies allow customers to cancel online, but most will require a call. Keep in mind that the company wants to hold on to customers, which could mean they try to entice you with offers or deals. You have the right to cancel at any time.

3.   Consider sending written confirmation to make things official. Send a letter to the credit card company informing them that you have canceled the same credit card account. Post it via certified mail to ensure the company receives the letter with confirmed receipt.

4.   Cut up the card. Shredding or destroying the card helps prevent fraud.

5.   Look at credit reports for changes to your credit score. The canceled account should be reflected in your credit score within several weeks. AnnualCreditReport.com offers a free copy of your credit report once a year.

Keep in mind that you can also track your credit score with a money tracker app. It helps you stay up to date with any changes that affect your score, allows you to connect all your bank accounts, and lets you monitor your spending habits and savings all in one place.

Can Closing a Credit Card Impact Your Credit History?

Closing a credit card can affect the length of your credit history. That’s important to know because credit history is one of the factors used to help determine your credit score. In general, creditors want to know that you’ve had credit accounts over a period of time, so the longer the relationship, the better.

Recommended: 10 Credit Card Rules You Should Know

How to Downgrade Your Credit Card

If you’re considering canceling your credit card because of high fees or a high interest rate, you might want to downgrade the card instead. By downgrading, you can swap out your current credit card for one with a lower fee or lower interest rate.

Downgrading can provide some of the benefits of canceling the card without the negative impact of closing the account.

If downgrading sounds like a good option for you, these strategies can help:

•   Research the credit card issuer. Do they have cards with a low or no annual fee? It may be worth switching to a credit card issuer that can provide this type of card.

•   Call the credit card company and ask for a downgrade. They may offer to waive the annual fees on your existing card, or they may downgrade you to a low-interest card with no annual fee.

•   Ask about a partial refund. Some credit card companies will provide a partial refund on the annual fee, depending on when you downgrade. Ask the customer service representative if they can divide the annual fee and provide a refund.

How to Keep Your Credit Utilization Rate Low

Whether you downgrade a credit card or not, it’s important to improve your credit utilization rate since it counts for 30% of your FICO score. Here’s how to keep yours low:

•   Make more than one credit card payment a month. Making more than two automatic bill payments or one payment per billing cycle can benefit your credit score. That’s because credit card companies report balances toward the end of the billing cycle. Making several payments can reduce your credit utilization ratio when your balance is reported.

•   Keep credit accounts open, if possible. Keeping a card open, even if you rarely use it, increases your credit limit and helps lower your credit utilization rate.

•   Ask for an increase in credit limit. If you have a record of on-time payments, your credit card company may be willing to increase your account’s credit limit. And the more available credit you have, the better your ratio. Call customer service to make the request.

The Takeaway

Canceling a credit card can negatively impact your credit score, so make sure to consider all your options carefully. You can keep the credit account open, which can help with your credit history, and rarely use the card. Or you can downgrade to a card with a lower interest rate and no annual fee. In the end, the decision is yours, but it’s good to know you have choices.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How do I close a credit card without affecting my credit score?

Closing a credit card will very likely have a negative impact on your credit score. Downgrading to a card with a lower interest rate and no annual fee may be a better option.

Is it better to cancel unused credit cards or keep them?

If the credit card has a low interest rate and no annual fee, it may be more beneficial for your credit score and your credit history to keep the card. Keeping an unused credit card also increases your credit limit.

Does canceling a credit card hurt your credit score?

Canceling a credit card can hurt your credit score. However, practicing other good credit habits, such as paying your bills on time, can help you gradually achieve good standing again.

If I have too many credit cards, is it better to cancel one?

If having multiple credit cards is causing you stress or missed payments, owning fewer cards can help lighten the load. However, you could also consider using a budgeting app to help track and manage payments.

Should I cancel my credit card if the fees are too high for me to manage?

If the fees on your credit card are too high or you’re not reaping the benefits offered, you may want to consider downgrading to a card with a lower fee. Call the credit card company to discuss your options.

Photo credit: iStock/Doucefleur

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SORL-Q126-026

Sometimes, our dream home is right under our nose. Buying a house from a relative may be the perfect solution, but you should be aware of how to negotiate and seal the deal.

An adult child may have her heart set on buying her parents’ home because of the memories it holds. Another person might want to purchase Grandma’s home so they can retire in Florida. Others may have a relative who wants to give them a good deal.

Whatever the case, if you’re buying a house from your family, you’ll want a harmonious handoff.

Buying a House From a Relative

It’s important to understand the home-buying process before making any real estate purchase.

And knowing what is needed to buy a home is useful before buying a home.

Buying a house from family, though, is a bit different than a deal between strangers. First of all, whether you’re a first-time homebuyer or not, it’s important to consider how crafting the deal can affect familial relationships.

By not hiring real estate agents, you might keep negotiations and planning in the family. If that’s the case, it’s a good idea to have regular check-ins to ensure that both parties feel comfortable about the next steps and are ready to move forward.

After an initial meeting, you should take notes of important details about the arrangement and make copies for everyone to review. That way, everyone is clear on the expectations.

Do You Need Real Estate Agents and Other Pros?

Even though buying a house from family is a personal affair, it can be helpful to bring in professionals to make sure the process goes smoothly, you do everything legally, and both parties walk away feeling satisfied and respected.

A lawyer or real estate agent can help ensure you create the purchase contract properly, you make state-required property disclosures, and that the house sells for fair market value — what the property would sell for on the open market.

A title company can protect the buyer from any liens and ensure that no one else has a claim on the home. Even with a high level of trust between family members, this can be a smart step to take to protect the buyer.

It can also be helpful to consult a tax professional to be aware of any tax implications of the agreement.

Determine the Purchase Price

You can decide on the fair market value by reviewing the sales price of recently sold comparable properties in the area of the home or by hiring an appraiser to conduct an objective property valuation. Keep in mind that lenders usually require an appraisal.

Once both parties have an idea of the market value, they can decide how much the buyer will pay. In some cases, this will be the fair market value. In other scenarios, a family member may offer to pay closing costs or provide a cash gift or gift of equity (described below).

Draft the Purchase Agreement

When both parties are ready to move forward, it’s time to draft a purchase agreement. The legally binding real estate purchase contract will outline the price and payment terms.

Buyers who need a home loan can send the contract to their lender when applying for a mortgage.

Prepare for Scrutiny

There are two main types of real estate transactions: arm’s length and non-arm’s length.

In an arm’s-length transaction, the buyer and seller do not have a relationship and are acting in their own self-interest.

When someone buys a home from a family member, it’s a non-arm’s-length transaction. These deals may be subject to more scrutiny because the chance of mortgage fraud increases.

In a non-arm’s-length transaction, the sale price of the home must be equal to what it would be between strangers unless a gift of equity is on the table.

A heads-up for anyone whose elderly family member needs to go to an assisted living facility or nursing home and plans to fund their stay with Medicaid: To prevent Medicaid applicants from simply giving away a home or other resources to qualify for the low-income medical program, the federal government has a look-back period of five years. The exception is California, which currently has a 2.5-year look-back period. The government penalizes Medicaid applicants who gift or sell assets for less than fair market value during that time.

Know How the Gift of Equity Works

One thing sellers may want to consider is giving the relative a gift of equity or selling for less than fair market value.

The maximum amount of the discount without reporting it as a gift to the IRS is $19,000 per recipient in 2025.

Spouses splitting gifts may each contribute $19,000 a year, and they must always report the gift. You and the seller can learn more about gift taxes on the IRS website.

That doesn’t mean sellers have to pay a gift tax; they can apply it to their lifetime gift exclusion. The lifetime gift and estate tax exemption is $15 million, or $30 million for a couple, in 2025.

For the vast majority of people, the gift and estate tax exemption allows for the tax-free transfer of wealth from one generation to the next. Homeownership in general helps build generational wealth.

Here’s another plus for buyers: Most lenders allow the gift to count as a down payment.

A lender will require a gift letter signed by the sellers for a cash gift or a gift of equity sale. The letter will confirm that the gift is not a loan.

Know How to Finance the Home

When buying a home from a family member, many buyers will still need to take out a home loan. Even with a discount or a special offer from a family member, it can be hard to purchase a home outright.

When taking out a loan, should you go with a mortgage broker or direct lender? Each has pluses and minuses.

Any mortgage loan officer or broker should be willing to answer your mortgage questions, including those about fees, points, and mortgage insurance.

Weighing different types of mortgage loans (including conventional conforming mortgages, jumbo loans, and government-backed loans) and loan terms (usually 30 years) can help you make a more informed decision.

After applying for mortgages, you’ll receive loan estimates. It’s important to compare mortgage APRs, fees, and closing costs.

After you choose a mortgage and close on the home, your mortgage servicing outfit will handle your payments.

The Takeaway

How do you buy a house from a family member? For starters, consider calling in professionals, including a lawyer to help draft a contract. Make sure you and the seller understand how the gift of equity process works. When everyone is well informed, buying a house from a relative can be seamless.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What initial steps should you take when buying a house from a relative?

You should first consider how buying property from family members can affect familial relationships. During negotiations and planning, you should ensure that both parties feel comfortable, and distribute written copies of all the important details to all involved.

What is the gift of equity, and how does it help buyers?

The gift of equity allows the selling of property for less than its fair market value, allowing sellers to transfer part of their home’s value to their relative as a credit. Most sellers count the gift as a down payment, helping buyers secure a smaller mortgage and reduce their payment at closing.

What should you consider when taking out a home loan?

When deciding to take out a home loan, you should determine whether a mortgage broker or a direct lender makes more sense. You should also consider different kinds of loans and loan terms, and compare mortgage APRs, fees, and closing costs.

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