Kate Wood
Appearances
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So in most parts of the country, it is very much still a seller's market. And, you know, realistically, in that kind of market, making a larger down payment could potentially help set you apart from other buyers, especially if you're competing with cash buyers.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Even if the seller is looking at two offers that are offering the same price for the home, sometimes seeing a larger down payment can feel like more money to them. Just seeing that number feels a lot better. They feel more confident. It can also send the message that you're making a serious offer.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
But especially for first-timers, it's important to remember that you are not required to make a 20% down payment. Last year in 2024, according to the National Association of Realtors, the median down payment for first-time home buyers was 9%.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
generally a substantial amount, right? Even if you were looking at a $100,000 home, which really doesn't exist at this point, but even if you were, that would be saving up $20,000. That's a lot of money to set aside.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So the idea that you need that size of a down payment, it just comes from conventional loan requirements that you need a down payment of at least 20% to avoid private mortgage insurance. So you can make a lower down payment. So you'll need to pay private mortgage insurance until you've got at least 20% equity in the home.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
And this is to help assure the lender that they aren't taking on too much risk. So mortgage insurance, it's not nothing, but I also want to emphasize it's not the end of the world, okay? So mortgage insurance is going to vary between about 0.5% to 1.5% of the amount of your mortgage. So not of the price of the home, but the amount that you actually borrow.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So you'll be at the lower end of that, that 0.5%, if you have a higher credit score. On a $350,000 mortgage with a 10% down payment, that would be like $120 at that 0.5% to about $400 at that 1.5% per month. And again, with private mortgage insurance, when you have enough equity, you can cancel it.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
In my experience, so back when I bought my home because I was a pandemic home buyer myself, I got really hung up on avoiding mortgage insurance and I actually did make a 20% down payment.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
And in retrospect, that was something that I actually came to really regret because I could have made a smaller down payment and had my budget stretch a bit further, or I could have made a smaller down payment and just had more cash on hand for improvements, which I really needed because the home I bought was a fixer-upper.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
This is a calculator where you just put in your info, so your income, your monthly debts, other expenses, along with the basics of the home loan that you're looking to get. So an estimated down payment amount, estimated interest rate. So we have a great calculator on nerdwallet.com, the how much house can I afford calculator.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
That gives you a detailed breakdown showing you whether what you've entered would be affordable or whether it would stretch your budget a bit. And you can find a link to that in our show notes.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
You can also use this kind of calculator to see how your monthly mortgage payment and your home buying budget would change if you made a higher or a lower down payment, if you paid off some of your debt, or if you otherwise sort of changed your financial picture a little bit.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Really, whether you want to make a larger or smaller down payment depends on you. Again, it does also depend on the type of loan that you're choosing because that will decide what the bare minimum is. But there are pros and cons to whether you want to pay that bare minimum or if you want to save up and make a larger down payment.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So like we mentioned a minute ago, a higher down payment can help you stand out as a buyer. And it will also give you more equity in the home more quickly. So even if you are in a position where you're paying private mortgage insurance, you're not paying for it for as long. But on the other hand, you could be saving for years to put away enough cash to make that big down payment.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
On the other hand, a lower down payment could help you become a homeowner much more quickly. And it could leave you with more cash on hand for other homeownership needs. But you're going to need to have a higher credit score to qualify for the lowest down payment loan options. And you'll also have minimal home equity.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So in a situation where home values were to decline, you could potentially end up owing more on the mortgage than the home is actually worth.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
You know, down payment is big, but it is not everything. There is a lot to plan for. So as a buyer, you're going to pay closing costs in order to close the sale of the home and I am sorry to tell you there are kind of a lot of them. To give you the basics of what you can expect to pay for, you're going to pay an origination fee.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So it's basically a fee the mortgage lender is charging you for giving you the loan. You're going to pay for an appraisal that the lender orders. You might pay for the title search and title insurance. If you want any home inspections, which generally you should want at least a basic home inspection, you're going to pay for those.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Another thing, you might actually end up paying your real estate agent. This is relatively new for home buyers, and this was a big component of a lawsuit in 2024 against the National Association of Realtors. So previously, home sellers generally paid the buyer's agent's commission as well as paying their own agent. Now, that's something you can negotiate the seller.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Admittedly, this is something you could have negotiated with the seller before, but again, because of this lawsuit, this is much more front and center. If you are in a situation where you are paying for your own agent, that's potentially adding a big line item cost to your budget, like as much as 3% of the purchase price.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Overall, closing costs generally run between 2% to 6% of the home's price, and that's again before we get into agent commissions. Don't get completely scared off by the agent commission stuff. This is really just a good to know that it's something that could come up.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Also, because of these changes, a buyer's agent is more likely to want you to sign something when they initially start showing you homes. That didn't used to be the case. It used to be much more. You could call someone, they'd show you some things, you'd eventually get around to signing something before you actually closed on the home.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Now, real estate agents are more likely to want buyers to sign something upfront.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Yep, you will definitely want to budget for moving, which can get pricey really quickly. Home repairs are another one. You know, I talked about buying a fixer-upper, but even if you're buying a new construction home, there are always things that are going to come up. And so you don't want to have drained your bank account for that initial home purchase.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Another thing to bear in mind is that when you've just bought a home, you're pretty likely to be very spendy. If you've never been to a Home Depot or a Lowe's, you are probably about to get very familiar with your Home Depot, right? You are going to feel like Home Depot is an extension of you.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So one thing that I did after I bought a home, and this helped me out a lot, during the time that you are getting ready to buy the home, you know, you're working on building your credit, you're trying not to touch your credit, you know, let's keep it as high as we can. Let's keep this score pristine. Once the sale has closed, you can put that credit score to work. And so I absolutely did.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
I applied for the best credit card I could get that had the longest introductory 0% APR period. And that was incredibly helpful because I was able to pay off really big purchases I was making for my home, like furniture over time without paying interest on them.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
That is very relatable. And I don't blame anybody for feeling that way. You know, home prices are high in the U.S. They've been high for decades.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
a while and so i think something that's really important is to have a good idea of how much you would actually need know that there are low down payment options out there if you're a qualified borrower you can put down as little as three percent on a conventional loan something else that i always like to plug because i feel like not enough people know about them are first-time homebuyer assistance programs so these are available in every single state through your state's housing finance agency
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
We actually have a page on nerdwallet.com that has tons of state-specific info. We can put a link to that in the show notes. So these HFA programs can provide a bunch of different kinds of assistance, but one you'll see pretty frequently is down payment assistance. Sometimes this is in the form of a low interest deferred loan. Other times it's grants. So that's free money to help you buy a house.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Down payment assistance is also something that you can look out for when you're comparing mortgage lenders. Lenders obviously know that this is a really tough time to be a buyer. And especially over the past year or so, we've been seeing a lot more lenders offering a down payment assistance as an incentive.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So this is going to be a pretty personal one, right? What's going to be comfortable for you is going to depend on your overall budget. That said, when you're specifically looking at qualifying for a mortgage, you are going to want to examine your debt-to-income ratio. Debt-to-income or DTI is pretty much what it sounds like.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
It's your monthly debt payments relative to your gross or pre-tax monthly income. Lenders will look at your front-end DTI, which is just what the mortgage would cost versus your gross income, as well as the back-end DTI, which is inclusive of the mortgage and your other debts. And what's a good DTI to have?
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
A good back-end DTI, so again, that's the mortgage and your other debts you're paying, would be like 36% or lower. A good front-end DTI, just the mortgage versus your gross income, 28%. That said, those numbers are not realistic for a lot of buyers simply because home prices are so high.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Something else to think about when you are running these numbers is to bear in mind that DTI only looks at debts. So on one hand, yes, that's what the mortgage lender is going to use to figure things out. But because it's only looking at your debt, that might not reflect a number that's really comfortable for you.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
For example, that includes your car payment, but it doesn't include what you spend on car insurance and gas. You know, importantly for many folks, it doesn't include payments like childcare costs, and that can be a really big chunk of your budget, but it's not showing up because it's not a debt.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So when you are figuring out what would be a doable monthly payment for you, you're probably going to want to consider some of those other necessary monthly costs or payments that aren't technically debt. Again, that's something you can do with NerdWallet's Home Affordability Calculator, just to plug that one more time.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Something that myself and the people on my team are constantly telling people is that it's about when is the right time for you to buy, not when is the right market. So if you are not ready to buy right now, do not try to force yourself to hurry up just because you think the market might change. But by the same token, if you're ready to buy now, by all means, go for it.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
No one knows exactly what's going to happen. I will say in general, experts are expecting some change, but no one is really forecasting like a huge change in the market. Mortgage rates have been, you know, in the 6% range for a while, between like 6, 6.5%. We probably will see modest movement, but again, no one's really anticipating a major drop or a major spike.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
I've talked about prices a couple times. I will say the rapid price increases that we saw a few years back have kind of leveled off. Overall, prices are still rising, but the year-over-year increases that we're seeing have become much more modest. And in some markets, especially the priciest ones, we've actually seen some little, little price drops.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So it is still a seller's market, but it is at least becoming a little less intense for buyers. Because again, mortgage rates have held relatively steady and people are adjusting to this new reality of, you know, this is where interest rates are going to be.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
That means your homeowners who were intent on staying put because they had a really good, nice low interest rate are kind of realizing that if they ever want to move, they're going to have to give up that rate. So that rate lock-in easing up a bit is creating a little more inventory. That is good news for buyers because it's more to choose from.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
And that is what could finally create some potential for slightly lower prices.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Well, absolutely. You are in luck because I bought a house during the pandemic and I actually sold it this past summer. So I have a lot of firsthand nerdy advice about home selling. Definitely hit me up if you have any follow-up questions because I'm always happy to come back. One, I cannot underscore enough how strongly I would urge hiring a real estate agent.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
You can go for sale by owner, aka Fizbo, but it's a really tough route. Logistically, honestly, I cannot imagine if I had had to do it on my own, answering buyer agent questions, managing showings, all the stuff that my agent did for me, just yikes. That is so not something that I was about to do.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Now, I was in a relatively good position because I just loved the agent that I'd bought the house with. And so I reached out to her again when I was considering selling. That made, obviously, my agent search really simple. But overall, I felt like it was definitely worth the money. She gave me really good advice in terms of what to do to get the home ready for sale, how to price it.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Really, everything was very hands-off for me once the house was staged. And I was very grateful for that because by that point, I had moved out. I was really busy. I was setting up another place. And I could not have done that without my agent.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So commissions are really the largest cost when you are a home seller. There are other costs like transfer fees, document fees, stuff like that that you can't get around. But the commissions are the largest line item that you're going to have. And if you were to do for sale by owner, obviously then you're not paying a seller's agent's commission.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So the biggest thing to know about commissions, and we've already touched on this a little bit, but the biggest thing to know is that they are negotiable. A key change from last year's NAR lawsuit that people don't talk about as much is that commissions are no longer part of the listing information.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So it used to be that if a buyer's agent was looking at home listings, they would see how much they were going to be compensated. for that sale. They would see what the commission was going to be. This was never something that consumers were seeing. So they no longer have that information. They're not seeing how much they'll be paid. And so that's something that can be negotiated with each agent.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
As the seller, you can negotiate how much you're willing to pay them. You can also negotiate how much you'd be willing to pay a buyer's agent. Now, a really big part of that suit is that it is sort of no longer automatic that a seller will pay for the buyer's agent. That said, a lot of buyers are probably going to try to see if you will pay for their agent because that's been customary in the U.S.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
for such a long time. Like, this was never actually, you know, a rule anywhere that the seller had to pay their own agent and the buyer's agent. It never was a requirement. Now it's formally not a requirement.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
What we have seen anecdotally is that a lot of buyers are very much still trying to see if they can get the sellers to pay their agent commissions, just because as we discussed, when you're a home buyer, you already have a ton of costs. So whether you would get sucked up into that is really going to depend on your market.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So if you're in a hot market, you've got plenty of buyers or like you've got two strong offers that you can play off of each other, you could probably negotiate like, yeah, you know, I'll pay for my agent, but I'm not going to pay for your agent. Thank you very much.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
So I'm going to start pretty general and then we can zoom in a bit more. There are a couple of initial steps the listeners should take. And we can, of course, talk more about what the housing market is like in a minute. So since they are focusing on down payment, first up is knowing just what kind of home loan they intend to use, because that helps determine what down payment you'll need.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
Different types of mortgages have different down payment requirements, and these aren't given as dollar amounts. This is a percentage of the home's price. So conventional loans, which are what the vast majority of homebuyers use, can have down payments that are as low as 3% of the purchase price.
NerdWallet's Smart Money Podcast
From Broker to Budget: How to Buy or Sell a Home in 2025
There are also FHA loans, and these are often popular with first-time homebuyers because they have less strict qualifications. Those can have down payments as low as 3.5%. It's going to vary by credit score, though. For buyers who have a military connection and are eligible for a VA loan, or if you're buying in a rural area and could use a USDA loan, those loans don't require a down payment at all.