In early 2024, Kelly Diehr and her husband set out to buy their first home in Denver.

With no kids, six-figure income and a budget of $600,000, the couple felt like they were in a solid position to afford a single detached home where they could raise a family.

However, like many first-time buyers, they were disappointed by what they could afford, as median home prices almost immediately started rising from $599,000 to $639,000 between January and May, according to Realtor.com. To make matters worse, Diehr says mortgage rates were "crazy" at the time, hovering just under 7%.

For $600,000, the homes available were all over 20 years old, situated in less-desirable neighborhoods and required significant renovations, such as new flooring, kitchens and bathrooms.

"You go into the market, and you realize you have to give up on the ideal home that you thought you were gonna get, because six figures nowadays is nothing to buy a home," says Diehr, a communications professional who recently turned 31.

Like many major cities, Denver has seen home prices rise significantly since 2020, although the market has cooled somewhat over the past year. This trend mirrors what's happening in other large metro areas, where rapid price increases, combined with relatively high mortgage rates, have sidelined many first-time millennial buyers — even those with solid incomes, like Diehr and her husband.

And like many first-time buyers, the couple were forced to compromise by stretching their budget far beyond what they originally planned.

Spending more money to make a home more affordable

To better compete with other bids, Diehr and her husband realized they would have to increase their budget "to find anything that was somewhat updated" in Denver at that time.

However, to do so meant dipping into their retirement investments to expand their options, something they hadn't originally wanted to do.

In April 2024, the couple came across a newly built three-bedroom house that they liked. It had all the advantages of a new home, plus the seller was offering a credit worth $47,000. Such concessions are common in new developments, where developers often need to sell units quickly — even in a competitive market like Denver.

They ended up buying the property for $789,000, using the seller credit to buy down their mortgage rate. 

This strategy, otherwise known as "buying points" or "discount points," allows buyers to pay an upfront fee to a lender in exchange for a lower interest rate. It's increasingly common, too, with just under half of buyers buying points in 2023 — up from 27% in 2019. 

Diehr and her husband opted for a temporary buydown, which reduced their mortgage rate by two percentage points, bringing it down from 6.25% to 4.25% in the first year of the loan. In the second year, the rate will increase slightly, but still benefit from a one percentage point reduction. This strategy saved them about $800 a month, lowering their mortgage from $5,500 to $4,700.

The money saved has "allowed us to afford other expenses that come with new construction, such as blinds and our backyard," says Diehr. "It's also helping us build a [financial] cushion to bring in our first baby [next] March."

While Diehr is grateful they were able to buy a home, the trade-off was withdrawing from their retirement savings and spending about $200,000 more than they had originally budgeted.

"For $600,000, you'd think we'd be getting a turn-key home: three bedrooms, all-wood floors, two bathrooms and a decent backyard," she says. "And that is absolutely not the case."

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