Many buyers are finding it harder than ever to purchase a home. High prices, rising interest rates and little to no wage growth are making homeownership seem out of reach, especially for first-time homebuyers. These tough market conditions are also creating difficulties for real estate licensees to sell property, along with slower transactions due to tighter lending criteria.
As a real estate licensee, you may want to help. But offering financial advice or overstepping your role is risky. The good news? There are safe ways to help guide your clients towards potential options while staying within the scope of your role as a real estate professional.
Why Real Estate Affordability Is a Growing Challenge
Home prices remain high in many markets. At the same time, mortgage interest rates have more than doubled since 2021. Saving for a down payment now takes years, especially for younger buyers.
According to Zillow, 39% of loans in 2023 included a gift from a relative to help with a down payment or closing costs. Buyers are looking for creative, out-of-the-box ways to achieve the American dream. And real estate professionals are sometimes who they turn to for ideas.
Alternative Ways Buyers May Fund a Home Purchase
There are several ways buyers may be able to access money. It’s okay for licensees to let clients know these options exist, but always recommend they speak with a lender, qualified accountant, tax expert or financial advisor. Getting professional advice is essential.
401(k) and IRA Withdrawals
Some retirement accounts allow early withdrawals to help fund a home purchase. For example, Traditional and Roth IRAs may allow penalty-free withdrawals of up to $10,000 for a first-time home purchase, according to the IRS.
401(k) plans generally do not include this exception. Some plans allow hardship withdrawals or 401(k) loans, but they can come with taxes and penalties. Buyers should review the IRS guidelines on 401(k) hardship withdrawals and speak with a qualified advisor before proceeding.
Gifts from Family or Friends
Buyers can receive funds as a gift to help with down payments or closing costs. FHA, VA, and other loan types have specific rules. Lenders will typically require documentation, including a signed letter and proof of the funds’ origin. This is to ensure it is actually a gift and not a loan that needs to be repaid, affecting a purchaser’s debt-to-income ratio and their ability to qualify for a mortgage.
In 2025, the IRS allows individuals to gift up to $19,000 per recipient without triggering gift tax. A married couple can give $38,000 jointly.
DwellingDollars.com
DwellingDollars.com is a company that offers debt consolidation loans and other programs that may help home purchasers to free up funds. For example, by reducing high-interest credit card debt or monthly car payments, a buyer can improve their debt-to-income ratio and find more favorable terms for their mortgage.
Down Payment Assistance Programs
There are lenders and state programs offering assistance with down payments. This could come as a second mortgage, forgivable loan, or grant. Requirements vary from state to state and real estate professionals must advise their clients to confirm eligibility directly with the program provider or lender.
Seller Credits and Buy-Downs
Buyers can ask sellers to cover closing costs or help buy down the interest rate. This is a strategy to reduce monthly mortgage payments. Builders and developers frequently offer rate buy-downs or closing cost credits as sales incentives.
Loan Structuring
Some buyers choose a higher-rate loan initially with the intention of refinancing later, either when interest rates fall or once they’ve built sufficient equity in the property. Others may choose to pursue a second mortgage to cover part of their down payment. These strategies do also come with risks that need to be evaluated in conjunction with a qualified mortgage lender or finance professional. These discussions and decisions fall outside the scope of advice that a real estate licensee should provide.
Stay Within Your Professional Real Estate Licensee Boundaries
Real estate licensees are not financial advisors, mortgage specialists, or accountants. You must never recommend tax strategies, loan products, or specific programs. If you do, this will expose you to liability and possible lawsuits.
Instead, your role is to encourage your clients to discuss any options with a qualified professional. If you do share information with your clients, for example, IRS statements about withdrawing from 401(k) accounts, ensure you share full documents, citing the source, or reputable links – don’t try to summarize the information yourself. Also, make sure you clearly state that clients must verify everything themselves. Never imply a recommendation or guarantee. Simply suggest that clients look into it further and speak to a qualified professional.
Partner with CRES and Protect Yourself
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Whether you need real estate errors and omissions coverage as an individual licensee or as a real estate brokerage, you’ll get coverage that meets your state’s requirements plus legal advice and support to help you avoid claims before they happen.
Contact the CRES team today at 800.880.2747 so we can tailor a policy just for you.
