By Ashley Ann Reich

The housing market has been on a rollercoaster ride since the pandemic, and many are wondering when it will slow down and when the market will return to normal. Some families have held out on buying a home due to the increased interest rates and low inventory that won’t require them to spend more per month. If you are in the market for a home in 2025, let’s consider what the economy might do under a new presidency and review predictions on mortgage interest rates. 

With the market being rather unpredictable due to the interest rates fluctuating over the past four years, it is hard to determine when the best time is to buy. Before signing on the dotted line, it is wise to take a step back and examine affordability before making this large, life-changing purchase. 

  1. Review your current housing expenses – are you renting, or do you own a home now that you plan to sell? If you are renting, you are likely paying a small fee, or it is wrapped into your monthly rent for unexpected fixes and routine maintenance. If you end up buying a home, consider that those costs will need to be factored into your monthly expenses. 
  2. Determine your maximum price for a home – do not get into a situation where you become “house poor” and live paycheck to paycheck because of your mortgage. According to Rachel Cruze from Ramsey Solutions, a good rule of thumb on your housing expenses should be no more than 25% of your take-home pay to avoid your mortgage being a burden. 
  3. Location, location, location – find your ideal location and determine if you can afford the neighborhood and the taxes. Perhaps you have children and want to be in a specific area to get into a good school system. In some cases, there are drawbacks to living in the city versus the country due to taxes and drive time. Determine what your non-negotiables are in terms of location. 

Once you have found the home of your dreams, it is time to sign your life away. 

  • Consider current interest rates – interest rates fluctuate daily, and your real estate agent should keep you updated on when it might be best to pull the trigger. It is possible to hold out for so long, hoping the rates go down, that you end up not saving any money and, in some cases, end up paying more. The Federal Reserve’s latest cut to interest rates happened in November 2024, with many predicting that the rates will continue to decrease slowly into 2025. This is a good sign for home buyers!
  • Find the right lender – these days, there are many reputable mortgage lenders that can help guide you through the process. Many real estate companies partner with specific lenders that they trust. Look for agents who know the area that you want to be in and have the care and compassion to answer your many questions throughout the process. Talk about realtor fees and their experience with the market, and do not be afraid to ask for references. You will go through a rigorous credit check process and will have to submit many documents along the way, such as previous year’s tax returns and employment verification. 
  • Determine down payment – if you have been saving money ahead of purchasing a home, consider how much to use as a down payment. Dave Ramsey always suggests putting 20% down when purchasing a home, as this will put you at a lower monthly payment amount and will eliminate PMI or private mortgage insurance. In addition to a down payment that might be required by some lenders, you will need to factor in closing costs and any other fees wrapped into your closing document. 
  • Consider refinancing – once the market cools down, there is always an opportunity to refinance at a lower interest rate. There will likely be fees required, and you might have to purchase another home inspection, but it is worth weighing the cost-benefit of having a lower monthly payment. You might also consider refinancing to a 15-year versus 30-year mortgage for an even lower interest rate and faster payoff. Our first home was purchased during the height of the 2008 recession when interest rates were above 8%. Several years later, we had an opportunity to refinance at a 5% interest rate, which saved us quite a bit each month. 

Once closing has been completed, give yourself grace for the first few months as you get used to a new home. There will be – it’s guaranteed – unexpected expenses that you did not account for or the inspector might have missed during the inspection process. To give you an example, when my husband and I purchased a home in 2020, we had been living in our home for about a month when both of our air conditioning units stopped working during some of the hottest days of that summer. Thankfully, we had prepared ahead of time for what could happen and purchased the new units. Yes, this was a huge expense and took most of what we had saved, but we were grateful not to have to go into debt for the purchase. 

As someone who has gone through the home-buying process several times in my life, I have learned from the mistakes I made early on when purchasing. If you have found the home of your dreams and have planned financially for the expenses that will incur 2025 might be the year to buy. The home-buying process provides joy and excitement, and it is easy to understand why having a home of your own is truly the American Dream.

ABOUT THE AUTHOR

Ashley Ann Reich has been with Liberty University since 2007, first working in Student Financial Services and then as Executive Director of Government Affairs before transitioning to her current role as Senior Vice President of University Compliance. During her time at LU, Ashley started the first financial literacy program, reaching thousands of students in budgeting, paying down debt, and planning for the future.