After hitting a historic low in 2025, first-time home buyers may find a more supportive housing market in 2026. Last year was especially difficult, as rising home prices and elevated mortgage rates pushed a record number of prospective buyers out of the market. At the same time, high rents, student loan debt, and growing childcare costs made saving for a home increasingly challenging.
Despite strong interest in homeownership, many first-time buyers have been forced to delay their plans. Jessica Lautz, deputy chief economist at the National Association of REALTORS® (NAR), notes that while owning a home remains one of the most effective ways to build long-term wealth, delayed entry often means missing out on years of equity growth. According to NAR, buying a starter home at age 40 instead of 30 can result in about $150,000 less in accumulated equity over time.
In 2025, first-time buyers represented just 21% of all home purchases—the lowest share ever recorded—while their average age climbed to a record high of 40. Historically, first-time buyers have accounted for closer to 40% of the market, highlighting how sharply affordability pressures have reduced participation.
A Potentially Brighter Outlook in 2026
There are early signs that conditions could improve in the year ahead. Mortgage rates are expected to ease toward 6%, which could improve affordability for up to 1.6 million renters, according to NAR estimates. Housing inventory is also slowly increasing, giving buyers more choices and improving negotiating leverage as sellers become more flexible. Together, these factors could help reopen the market to more first-time buyers, even if progress remains gradual.
Making the Numbers Work
Saving for a down payment continues to be the biggest hurdle. Today’s first-time buyers put down about 10% on average—the highest level in nearly 40 years. As a result, those who succeed in buying often come from higher-income households. To overcome this challenge, some buyers are choosing alternative paths such as living with family to reduce rent or purchasing with roommates to share upfront costs and future equity.
While personal savings remain the primary source of funding, about 25% of buyers also tap assets like retirement accounts or stocks, and 22% receive financial help from friends or family, according to NAR. Speaking with a lender early can also uncover options many buyers are unaware of. Matt Vernon, head of consumer lending at Bank of America, emphasizes that early education and lender conversations can significantly expand available choices.
Exploring Mortgage Alternatives
More buyers are moving beyond the traditional 30-year fixed-rate mortgage. Adjustable-rate mortgages (ARMs), which offer lower initial rates before adjusting later, are gaining popularity as a way to reduce monthly payments. At Bank of America, about 10% of recent loan volume has come from ARMs—the highest share since 2023. Chase Home Lending has seen similar demand.
Shelley Jonietz, a lending manager at Chase, notes that ARMs can work well for first-time buyers who expect to move within a few years. However, she cautions that they should be viewed as short- to medium-term affordability tools, and buyers must fully understand how future rate adjustments could impact payments.
Government-backed loans remain another important pathway. FHA loans allow down payments as low as 3.5%, while VA and USDA loans may require no down payment for eligible borrowers. Conventional loans can require as little as 3%, though lower down payments often come with higher mortgage insurance costs.
Assistance Programs and Buyer Strategies
Lenders are expanding assistance programs to help bridge affordability gaps. Bank of America offers down payment grants of up to 3% (capped at $10,000) and additional homeownership grants of up to $7,500 for closing costs or rate buydowns. Chase provides similar support through FHA, VA, and its DreaMaker loan, along with grants of up to $5,000 in eligible areas.
Experts recommend several steps for buyers preparing for 2026: protecting credit scores, reducing existing debt, comparing loan options, and considering rate-lock programs to manage interest-rate uncertainty.
Cautious Optimism Ahead
Home builders are also responding by cutting prices, offering incentives, and increasing the construction of more affordable townhomes. With easing rates, growing inventory, and modest improvements in affordability, 2026 could offer a more workable—though still challenging—path for first-time home buyers ready to act.
