WSJ Your Money Briefing - Buying a Home in 2025: How to Be a Better Buyer

Episode Date: April 6, 2025

If you think you’re ready to take the plunge but feel overwhelmed by rising costs and the competitive landscape of the housing market, this episode is for you. In the second episode of our special series, “Buying a Home in 2025: Navigating the Crunch,” we’ll hear from a woman who recently closed on a house in Virginia. Host Ariana Aspuru will be joined by Wall Street Journal reporter Veronica Dagher and financial coach Bernadette Joy to discuss the steps you can take to prepare, whether as a buyer or a seller: what’s in your control, what isn’t, and other unexpected expenses.  If you missed episode one, listen here. The final episode of our series airs next Sunday.    Sign up for the WSJ's free Markets A.M. newsletter.  Further reading:  Home Sales Rose 4.2% in February, Beating Expectations  If You Want to Buy a House, First Figure Out All the Hidden Costs  Home Buyers Start to Come Off Sidelines Even as Rates, Prices Stay Stuck - WSJ  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Dominique Ross knew exactly what she wanted when she was searching for her first home. We wanted a single family home. That was like a non-negotiable because we wanted land, we have dogs and we like to be outside. We didn't think it was too outrageous to ask for the things that we were looking for, at least in our market. And she got them.

Dominique and her fiance recently closed on a home in Virginia. It was built in the 60s and checked off enough of her boxes, including the coziness factor. We've only moved in like the past, we've been in here for maybe like three weeks. But one thing we've definitely done is sit down in the den next to the fireplace with like some hot chocolate. It's very, very vibey. So how did she land her new home, despite the tough housing market? And what can her story tell us about what other buyers can expect this year?

Here's your money briefing for Sunday, April 6th. I'm Arianna Aspuru for The Wall Street Journal and this is the second installment of our three part series, Buying a Home in 2025, Navigating the Crunch. Last week we took a snapshot of the housing market to see how interest rates, inventory and the economy are affecting prospective buyers. We looked at how many of them have been sidelined by a tight market. But that isn't keeping buyers like Dominique out. We were just like, it works for us now, even though it's like not optimal interest rates and things like that.

We felt pretty comfortable with moving forward. So if you or someone you know is looking to buy a home this year, we'll talk about where to start after the break. Okay, Martin, let's try one. Remember, big. You got it. The Ford It's a Big Deal event is on. How's that? A little bigger. The Ford It's a Big Deal event.

Nice. Now the offer? Lease a 2025 Escape Active all-wheel drive from 198 bi-weekly at 1.99% APR for 36 months with $27.55 down. Wow, that's like $99 a week. Yeah, it's a big deal. The Ford It's a Big Deal event. Visit your Toronto area Ford store or Ford.ca today. As a home buyer, mortgage rates and prices are largely out of your control. But what you come to the table with could open doors for you.

Before someone starts looking for a home, I always let folks know that they need to look at their current financial health and you can do that two ways. That's Bernadette Joy. She's a financial coach and is actually also in the process of searching for a home. And in her professional life, she talks to her clients about home buying all the time. As for those two things she says you need to look out for, there's your net worth. I.e. all of the assets that you currently already own that includes cash, that includes your current investment, any other property that you might own, your car, things like

that, and also any liabilities that you have. Plus your monthly expenses. The second thing I tell people to look at before they even go look at a home is to have a budget and understand how owning a home might impact their month-to-month budget. And to be an attractive buyer, Bernadette also says you can't skip over your emergency fund. The thing that I think that most people really overlook is having enough cash on hand for an emergency fund as a homeowner because emergencies will happen, not just if it's just a matter of when something will break in your house and making sure you have enough money to cover

that and also having enough money to cover actually moving and furnishing the home. So I have seen a lot of examples of people putting all that money towards a down payment and then literally having to put all of the furniture and credit cards because they didn't account for that in their budget. First time home buyer Dominique, who we met before the break, says that she factored in the amount of cash she had on hand plus her emergency budget and how much she was able to put on a down payment. We're very aware of our kind of financial habits,

and it really helped us to go into the process knowing exactly how much we were willing to pay, like what our limits were. I think that just made the process like a little bit less scary. This is like the biggest purchase somebody's gonna make in their entire life. So knowing your numbers

and knowing what housing prices are going to work for you, what is out of your budget, do some mock budgets and just see how that mortgage payment fits into your monthly budget. She also factored in some wiggle room just in case her life completely changed. We bought a house that was affordable to us. We still have emergency funds left over. And if I were to get laid off from my tech job, my fiance's salary can pay for the mortgage on his own. Money coach Bernadette Joy has bought a few properties in the past, and she uses that same strategy. One of the rules of thumb that my husband and I have always

had, which I know is not realistic for everyone, But we've always tried to buy a home, assuming one person's income and not both. Because the idea was if one of us lost our jobs, that we could still afford that home without having to worry about paying our bills. I always tell people that you should have been consistently doing a budget for at least six months before you even go look at a home so they can really get a sense of what your expenses are and how that might be impacted. And you also want to look at, again, what your current assets and liabilities are because even though those things don't And you also want to look at, again, what your current assets and liabilities are, because even though those things don't necessarily show up on your credit score, there are great

things for you to have in your back pocket. That last part, having a good credit score is key to unlocking better mortgage rates, which will save you money over the life of your loan. According to mortgage company Fannie Mae, a conventional mortgage usually requires a credit score of at least 620. At that score, credit reporting agency Experian estimates that your rate on a 30-year mortgage would be about 7.89%.

But let's say you have a stronger score, like an 800. Like that could bring your mortgage rate down to 7.07%, which could potentially save you thousands. The mortgage rate hunt was one of the most nerve-wracking parts of Dominique's search. At the end of the day, I really just wanted to lock something in so we could just, you know, move forward instead of spending so much time reaching out to different banks and filling out different mortgage applications. That was grueling, honestly.

But I think it paid off because we ended up getting a decent rate for the time and for our mortgage terms. So when should you get approved for a mortgage rate? According to Zillow, a good rule of thumb is to get a pre-approval at least 90 days before buying a home. And depending on the lender, you might be able to lock in a rate for 30, 45, 60, or 90 days. In this market, it's the first thing that Josh Petrie does when he sits down with clients.

He's a real estate agent in Georgia. We start talking about what works for them. We need to understand that interest rates are temporary. I know about a year ago, a lot of people were saying, marry the house, date the rate. Meaning you could refinance later if rates go down. I don't believe that. I think that you need to be prepared to be stuck with that rate

until you close on that loan. Because interest rates may not change. Now, we think they will. We know that they change every day. You know, I wish we had a crystal ball, but we don't. So what we have to do is we have to live for the now. We have to figure out what do you need in this moment and how can we best get you there. So how can you manage expectations about what you can actually afford in this market? We'll

learn more after the break. Okay, flights on air Canada. How about Prague? Ooh, Paris on air Canada. How about Prague? Ooh, Paris. Those gardens. Gardens. Amsterdam. Tulip Festival. I see your festival and raise you a carnival in Venice. Or Bermuda has carnaval. Ooh, colorful.

You want colorful. Thailand. Lantern Festival. Boom. Book it. How did we get to Thailand from Prague? Oh, right! Prague! Oh, boy. Choose from a world of destinations, if you can. Air Canada. Nice travels. So far, we've mostly been talking about home buyers.

But let's take a moment to shout out sellers. For anyone who's been waiting to sell their home, real estate agent Josh Petrie says there's a few things within your control. I will say for the last five years, we've seen a very big seller's market. Multiple offers, people waiting outside of homes, going above and beyond the list price

and waiving contingencies and appraisals. I'm seeing a lot less of that. We're setting expectations with our sellers that are we going to get multiple offers? Maybe, but let's not set our hopes on that. Like, we are going to price your home where the market tells us to price it so that we can get buyers in the door. I asked my colleague Veronica Dagger the same question.

She writes a lot about the housing market. They largely can't expect to get the top price that their neighbors got back during the pandemic. Those days are over, especially in places like Florida and Texas. Things have changed a lot. There's a lot more competition. So if you want to sell your home quickly, you want to first of all price it right and work with your agent on that to make sure you're in line with what's recently sold in your neighborhood. And then there's other relatively minor things you can do to get a better price for your

home and make your home sell faster. Things as simple as cleaning the windows or cleaning up the front yard, getting rid of pet smells, getting rid of family photos or at least putting them away, trimming the hedges, all these things that enhance curb appeal that can really make a difference in how fast you sell and how much you sell the home for. Now back to buyers. Another thing to keep in mind when you're on the hunt is competition.

Like we just heard, buyers now have a smidge more bargaining power than they used to. To be competitive, you do generally need a higher down payment. According to a recent report from Redfin, the typical U.S. homebuyers down payment is 16% of the price, or more than $63,000. That's about $4,000 more than it was last year. Are we still seeing people compete against all cash buyers? They're trying to. It's really tough though. Many of these cash buyers are folks who are older, who've just sold their own house.

They're many of our retirees and they're coming in with a bunch of cash. And they have the flexibility to put down a deal, say a million dollars, all in cash. And that's really difficult to compete against if you're a first-time homebuyer. Some people are enlisting help from their family to do it. For example, maybe you're getting some down payment help from a parent or a group of family members to help you put more down and that makes you look a little bit more competitive. You can also look more competitive by saying,

you know what, I don't need any repairs to the house. I don't need any major changes. And so that's gonna make your offer more compelling to the seller compared to somebody who's gonna ask for a lot of concessions. But in general, yeah, it's tough. Okay, so bottom line, buying a home in this market is still a challenge, but not impossible. According to the National Association of Realtors, existing home sales rose 4.2% in February from the prior month, which is better than

experts anticipated. It tells us that there's an increase in shopping activity, and in the number of homes for sale since the start of the year. So more buyers are finding ways to make it work. But what if you need more time? Or you're holding out for a better market? Next week, we'll cover what you need to know about putting off buying a home. Where you've seen the market, inventory, and prices,

and you're hitting the brakes. What could change the market for you? What could make it better or worse? That's it for part two of our series, Buying a Home in 2025, Navigating the Crunch. Episode three drops next Sunday, but we'll be back tomorrow with a new episode of Your Money Briefing.

I'm your host, Arianna Aspuru. This episode was produced by me. Sound design by Jessica Fenton. Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Sinzley are our deputy editors. And Falana Patterson is The Wall Street Journal's head of news audio. Thanks for listening.