The Monthly Expense First-Time Homebuyers Overlook — Until Their Mortgage Application Fails

Car Payments Now Keeping More Homeowner Hopefuls Out Than Student Debt

A monthly car payment, not a stack of student loans, is the debt mortgage loan officers now most often see blocking a qualified renter from a first mortgage. Asked in a summer 2026 poll which type of consumer debt most commonly stops first-time buyers from qualifying, nearly half named auto loans.

Auto loans drew 47% of responses when loan officers were asked which type of debt most commonly blocks a first mortgage, far ahead of credit card balances at 27% and student loans at 15%. Loan officers described the result as one of the survey’s bigger surprises, given that student debt has dominated homeownership conversations for years.

Behind that single statistic sits a harder reality for people trying to buy their first place. Sixty-one percent of loan officers said today’s first-time buyers face greater affordability strain than buyers did five years ago, and only 4% said buyers are better prepared financially than they were then. HomeLight’s Lender Insights & Predictions for Summer 2026 gathered these views from loan officers at 57 lending companies across the country, fielded June 10 to June 23, 2026.

Auto Loans Outrank Student Debt For First-Time Homebuyers

Rising vehicle prices and the payments that come with them feed directly into a number lenders watch closely: the debt-to-income ratio, a comparison of what a borrower owes each month against what they earn. A large car payment can push that ratio past the limit a loan program allows, even for someone with steady income and good credit.

Stephanie Sanger Robinson, a loan officer in St. Augustine, Florida, with 24 years of experience, put it bluntly. “First-time homebuyers need a wake-up call,” she said. “They are not buying the home their parents own. Starter homes are not always the forever home. Be realistic and don’t over-commit. And for the love of all things holy — there is nothing sexier than a paid-off car.”

A vehicle and its payment can be a personal choice, but loan officers said young and new buyers keep hitting the same wall regardless of how they got there.

Starter Home Shortage Tops the Affordability List

Debt is only part of the squeeze. Asked to name the single biggest obstacle keeping qualified first-time buyers out of the market, 46% of loan officers picked the shortage of affordable starter homes, well ahead of saving for a down payment or closing costs (18%) and mortgage interest rates (14%).

Ashlee Sheppard, a loan officer in Evans, Georgia, tied the problem back to supply. “The real solution is increasing the supply of homes that first-time buyers can actually afford… By building more starter homes, townhomes, and other attainable housing options, we create more opportunities for families to enter the housing market,” she said.

Lower rates and down payment help can ease the burden on an individual buyer, many loan officers noted, but neither closes the gap between how many entry-level homes exist and how many people want one. Jeannie Smith, a loan officer in Frisco, Texas, argued for building. “The most effective way to improve affordability is simple: build quality starter homes, in nice suburban areas, that a first-time homebuyer would be proud to call home,” she said.

Competition from investors sharpens the pinch at the low end of the market. Tim Whitmire, a loan officer in St. Louis, Missouri, with 25 years of experience, described first-time buyers going up against cash. “There is a severe lack of inventory of affordable houses. Homebuyers have to compete against investors who, many times, pay cash for the house. Regular people struggle to compete against that.”

First-time Homebuyers Are Working Harder For The American Dream

Faced with that math, many buyers have stopped waiting for rates to drop and started bargaining for cash up front. More than one-third of loan officers (37%) said asking sellers to cover closing costs is now the most common money-saving move among first-time buyers, the top tactic by a wide margin. Low-down-payment loans like FHA and HomeReady followed at 17%, with down payment assistance programs at 15%.

Family money remains a steady presence in these deals. Eighty percent of loan officers said at least 10% of their first-time buyers get financial help from relatives, and 43% said a quarter or more of their buyers do. Jayne Combs, a loan officer in Pleasant Hill, California, with 42 years of experience, sees the change in who signs the paperwork. “Buyers are becoming ‘team buyers’ instead of solo buyers,” she said.

Even qualified buyers often hold themselves back over a myth. Alexander Arcelay, a loan officer in Bernardsville, New Jersey, said the belief that a purchase demands 20% down keeps people renting longer than they need to. “One of the biggest challenges I see every day is not necessarily affordability itself, but the perception that a homebuyer needs a 20% down payment or a large amount of cash saved to purchase a home. Many qualified buyers delay homeownership for years because they simply don’t realize how many programs and financing solutions are available to them.”

Homeowners Stay Locked in as Economic Worries Grow

Part of the reason so few starter homes reach the market traces back to the people already living in them. More than seven in ten loan officers (71%) said the main thing keeping current owners from selling is reluctance to give up a historically low mortgage rate, a gap that dwarfs worries about the cost of a replacement home (11%) or the broader economy (10%). Walter Hanson, a loan officer in Oceanside, California, framed the arithmetic that keeps people put: “Interest rates today compared to 2021/2022 are effectively doubling mortgage payments from what they were when rates were lower.”

Some owners are moving anyway. Thirty-nine percent of loan officers said growing families chasing more space are the group most likely to sell despite holding a rate below 4%, while 24% pointed to major life events such as divorce, death, health issues, or financial hardship.

Looking past year’s end, loan officers expect the story to widen beyond rates. Thirty-eight percent named economic uncertainty as the biggest housing question for the rest of 2026, ahead of affordability challenges (28%) and mortgage rate changes (12%). On rates themselves, most stayed measured: 35% expect the average 30-year fixed loan to finish 2026 between 6.00% and 6.24%, and close to three-quarters expect it to land below 6.50%.

For a generation told that homeownership waits on the other side of a rate cut, the survey lands on a plainer message. Loan officers most often see buyers make headway by trimming their other debts, asking sellers for help, and dropping the 20%-down assumption, and they cautioned that those holding out for a return to pandemic-era rates may find the home they wanted costs more by the time they act.