A millennial who bought a home in 2023 shares the challenges of buying in today’s market, including high rates. He explains why he has no regrets and could ‘swallow the 6.5% mortgage.’

• Jesse Cramer bought his first house in 2018. In 2023, he sold it and bought a new primary home.
• The buying process looked a lot different this year than it did in 2018. Interest rates, for one, are much higher.
• Plus, sellers have more leverage and can demand things like a rent-back agreement.

In 2018, Jesse Cramer purchased his first home. He put down 10% and secured a 3.5% interest rate.

He didn’t consider it to be a long-term investment.

Rather, after running his numbers through a rent versus buy calculator, he concluded that buying made more financial sense: “If the house itself didn’t grow $1 in value, it was still the right financial move for me.”

Cramer sold his starter home in April 2023 and purchased “more of a forever home,” he told Insider.

In 2023, the purchasing process looked very different than it did in 2018.

To begin with, interest rates are higher.

“Buying a house at today’s interest rates is a significantly different financial decision than buying a house 18 months ago,” Cramer said. “We were able to get a mortgage at 6.5%, which is not great coming off of a mortgage in the 3.5% range.”

However, there were more differences between purchases than just the interest rate increase.

“Sellers have so much leverage because there’s such a supply constraint on homes,” Cramer, who lives in Rochester, New York, explained. “As a condition of the sale, our sellers requested to stay in the house for four months after closing so that they could take their time packing.”

This is referred to as a rent-back agreement, in which the seller temporarily rents the house from the new buyer in order to give them more time to find another home and relocate. Offering a rent-back can make your buyer offer more appealing. As a result, in competitive markets like today’s, these agreements are becoming more popular.

“I’m hearing more and more stories of that happening, where sellers are able to put demands on buyers — both monetary demands, such as a house selling for a lot more than it should sell for, but also these ancillary demands, such as rent-back agreements,” Cramer said.

Why the high rates and rent-back demand didn’t deter him from buying

Cramer claims to be free of buyer’s remorse.

Despite the higher interest rates, which raise your monthly mortgage payment, Cramer could still afford the payment comfortably.

In addition, he sees the property as a long-term home for himself and his wife. He is not attempting to maximize cash flow from an investment property.

“One of my personal finance principles is that the first and primary purpose of the house is a place for you and your family to live,” said Cramer, who works full-time for a registered investment advisory firm and runs The Best Interest on the side. “It is not a financial investment.” That is not the primary function of a house.”

“I was able to swallow the 6.5% mortgage pretty easily,” he added. “I’m not expecting this house to be a fantastic long-term investment. I just want it to be the right house for my family and me.”

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Of course, appreciation in home value would be a nice bonus. That’s exactly what happened to his starter home, which he didn’t expect to appreciate so much between 2018 and 2023.

“It doubled in price over five years,” he said, adding that this factored into his decision to purchase a new home. “It made perfect sense for us to sell the old house, walk away with a significant profit, and then use some of the proceeds to put down on the new house.”

Selling went quickly, as expected: “It was on the market for four and a half days.” We had somewhere in the neighborhood of 80 viewings and 20 to 25 offers.”

Cramer’s advice on buying in today’s market is similar to that of other homeowners and real estate investors Insider has spoken with: Don’t let a single factor, such as interest rates, prevent you from buying.

“The whole interest rate thing is largely out of your hands as a consumer,” Cramer explained. “You can certainly shop around and go to different lenders and find an eighth to a quarter point difference.” One lender may offer you 6.5%, another 6.75%, and yet another somewhere in the middle. However, it is largely due to what the Federal Reserve is doing.”

Successful investors concentrate on what they can control and figure out how to achieve their investment objectives despite the current economic situation.

“Don’t base your goals on the market climate,” says Dana Bull, a financially independent real-estate investor and consultant. Establish your goals and where you want to be in reverse. Place yourself in the middle of the equation.

Rather than waiting to see what happens with interest rate hikes or cuts, Bull recommends determining how you can still meet your real-estate goals with the current rate of around 6%. It may necessitate a reduction in your purchase price budget, as higher interest means a higher monthly payment.

She added that knowing what’s going on in the market is still important: “You don’t want to go into things blindly, but you also don’t want to be paralyzed based on what could or may not happen.”