With housing affordability at a near 40-year low, Americans are getting creative with their home buying. A recent survey conducted by JW Surety Bonds found 13% of Americans bought a home with a non-romantic partner. And more could follow suit. The survey said 61% of respondents are willing to buy a house with a friend.

Here’s why Americans are looking to less-traditional paths to homeownership and what you can do to potentially lower your mortgage payments if you’re considering buying a home.

Co-buying helps reduces mortgage costs

The average sales price of a home was $492,300 at the end of 2023 — up nearly 22% over the past three years. That jump alone has strained potential home buyers’ finances, and it’s been made worse by high mortgage rates.

For example, the average mortgage interest rate was 5.4% in 2022, but it’s now 6.5%. To put that increase in perspective, a $350,000 home at mortgage with a 20% down payment and a 5.4% interest rate would cost $1,572 per month (principal and interest). But with a 6.5% interest rate, the same home costs $1,771 per month — $199 higher.

This is why Americans are looking to divide the mortgage payment. Sharing the cost of a home was one of the main reasons people considered buying a house with a friend, along with being able to afford a better home.

Of course, buying a home with a friend may not be feasible, and not everyone wants to share homeownership. In fact, more than three-quarters of survey respondents said that interpersonal conflict was the biggest concern of sharing ownership. Thankfully, there are a few ways to make homeownership cheaper.

How to make your mortgage cheaper

If you’re in the market for a home right now and can’t wait for potential interest rate cuts that could come later this year, there are ways to lower your mortgage payment.

1. Use a financial gift for the down payment

You might be surprised to know that 38% of buyers use an inheritance or receive a financial gift from friends or family to use for a down payment. Just be aware that some loans have restrictions about receiving money to ensure it’s a gift and not a loan.

A financial gift could go a long way to lowering your mortgage payment. If you buy a $350,000 home with an interest rate of 6.5% and put 10% down, your combined principal, interest, and private mortgage insurance (PMI) payment would be $2,196 per month.

However, with a 20% down payment, you won’t have to pay PMI and will have a lower mortgage balance, making the payment $1,771 and saving you $425 per month. Plus, lenders may give you a better interest rate with a 20% down payment.

2. Improve your credit score

A higher credit score can help you get a better mortgage interest rate and, thus, lower your mortgage payment. The most effective way to improve your score is to pay your bills on time, since your payment history accounts for 35% of your overall score.

Late payments can stay on your credit report for up to seven years and one late payment can lower your score by as much as 180 points. The good news is that if you have a late payment on your report, the effect it has on your score diminishes over time.

Paying down your debts also does wonders for your score. The amount you owe lenders accounts for 30% of your total score. As a general rule, you should use less than 30% of credit that’s available to you. For example, if your credit card has a limit of $15,000, your balance should be under $4,500.

3. Shop around for the best rate

The bank you use for your personal checking and savings accounts may not be the best place to get a mortgage. Just like with nearly everything else you buy, if you want a good deal, you need to shop around. Not all mortgage lenders have the same criteria for borrowers, so comparison shopping can often help you find a better rate.

For example, if you find one bank that will lend you $350,000 for a home, charges a 6.5% interest rate, and requires 5% down, you’ll pay $2,307 per month in principal and interest. But if a competing lender offers a 6% rate with the same terms, you’ll pay $109 less per month.

Buying a house is challenging right now. Whether you go it alone or you’re considering co-buying with a friend, try to make as large a down payment as you can, improve your score before you apply for a mortgage, and shop around for the best rates.

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