The recent settlement by the National Association of Realtors (NAR) will change how real estate commissions are structured, impacting how low-income buyers cover these costs. Here are some strategies low-income buyers might consider to come up with the funds to pay a broker:
First-Time Homebuyer Programs:
Many states and municipalities offer programs for first-time homebuyers that include financial assistance or grants. These programs can help cover closing costs and other expenses, which could indirectly free up funds to pay the broker.
Check with local housing authorities or community organizations for available programs.
Down Payment Assistance Programs:
There are numerous down payment assistance programs (DPAs) that provide grants or low-interest loans to eligible buyers. These can reduce the amount of upfront money needed, allowing buyers to allocate some funds towards broker fees.
Resources like HUD’s list of state-specific programs can be a good starting point.
Budgeting and Savings Plans:
Creating a detailed budget to cut unnecessary expenses and increase savings can help accumulate the necessary funds.
Automatic savings plans where a portion of income is directly transferred to a savings account can also be effective.
Negotiating Broker Fees:
Some brokers may be willing to negotiate their fees, especially if they understand the financial constraints of the buyer.
Exploring different brokers to compare fees and services can also help find a more affordable option.
Utilizing Retirement Savings:
Certain retirement accounts, like IRAs, allow first-time homebuyers to withdraw up to $10,000 without penalty. While this should be approached with caution, it can provide a needed cash infusion.
401(k) loans or withdrawals are another option, though they come with different rules and potential penalties.
Family Assistance:
Gifts or loans from family members can provide the necessary funds for broker fees. It’s important to document these properly to avoid issues with mortgage underwriting.
Side Gigs or Additional Income:
Taking on a part-time job or gig work can help accumulate extra funds for the home-buying process.
Selling unused items or leveraging skills for freelance work can also contribute to the needed funds.
Community Land Trusts and Co-ops:
These organizations often have lower costs and can provide assistance with various home-buying expenses, including broker fees.
Non-Profit and Charitable Organizations:
Some non-profits offer financial assistance or counseling services to low-income buyers, which can help manage the costs associated with buying a home.
Seller Concessions:
Negotiating with the seller to cover some of the closing costs, including broker fees, can be an effective strategy. This is more likely in a buyer’s market where sellers are motivated to close the deal.
By exploring these options, low-income buyers can better manage the financial challenges posed by broker fees and other home-buying costs.