What are the problems facing lenders and how are they finding solutions?
Rising mortgage debt, stagnant wages, and a new generation of borrowers trying to outpace financial headwinds are putting pressure on lenders to rethink their playbook.
In California, where the average mortgage debt now tops $445,000, Nick Street, division manager at Street Home Lending, said the number isn't just a data point - it’s a wake-up call. “When I first heard that, I thought about how lucky some buyers are that have already gotten right,” Street said. “They have that much equity now.”
But that equity isn’t built on savings or wage growth. As Street pointed out, most of it comes from gains in existing properties - leaving new buyers at a stark disadvantage. “The bulk of those down payments have come from equity in other homes,” he said.
That disconnect is forcing lenders to adjust. With monthly payments climbing and incomes lagging, Street focuses on each buyer’s full financial picture. If someone isn’t ready for a $1,500 increase in their mortgage, he starts by looking at other liabilities. “What if we can eliminate some other debts that would get them more comfortable with it?”
Shifting focus, not shifting risk
Instead of relying on risky products or short-term solutions, Street focuses on thoughtful preparation. His team helps borrowers navigate traditional lending frameworks, which still provide the most favorable terms without adding unnecessary risk.
One tactic? Temporary buy-downs. For buyers expecting to become dual-income households in a year or two, easing into higher payments can make homeownership viable. “We’re able to kind of slowly ramp up into a higher mortgage payment,” Street said.
He’s also seeing younger buyers get more creative. “House hacking” - buying multifamily properties, bringing in roommates, or renting out parts of a home - is no longer niche.
“These aren’t fallback options - they’re strategic plays,” he said. And lenders can work with them. “Lending guidelines actually allow you… as a percentage of that income to help you qualify,” Street said, referring to projected rental income.
Tackling inventory and institutional competition
But even the most prepared borrower can’t move without available homes. The so-called “lock-in effect” - owners refusing to give up ultra-low mortgage rates - has created a bottleneck. Many are stuck in homes that no longer fit but can’t justify the cost of moving.
“How many times in their life are they going to sit on $400,000 to decide what to do?” Street said. The bigger issue is paralysis. “People feel overwhelmed on what to do first… I don’t want to sell my house and then I don’t have a house to move into.”
To break the deadlock, he turns to tools like bridge loans and buy-before-you-sell programs - strategies that give sellers the confidence to act without fear of being left homeless.
Then there’s the investor factor. Hedge funds and institutional buyers are crowding out individuals with fast cash offers and no contingencies. To compete, Street advises buyers to eliminate seller friction wherever possible: quick closings, full pre-underwriting, waived contingencies.
But he also leans on something harder to quantify: personal connection. “Sellers, at the end of the day, most of the time, would still prefer to sell to a person rather than an institution,” he said.
That human element can go further than people expect. Street encourages buyers to write letters, tell their stories, and even build rapport with investor sellers. “I’m going to find out who they are, and I’m going to build a relationship with them,” he said.
Maintaining strong ties with investor networks gives Street early visibility into properties that haven’t hit the market yet. These connections allow him to secure deals behind the scenes, giving his clients a competitive edge before bidding wars begin.
Amid a volatile market, Street isn’t just closing loans - he’s building pathways. “Our goal is always: how do we reduce risk to get somebody better borrowing terms?” he said.
