2025 Homebuying Guide

2025 is shaping up to be a pivotal year for homebuyers. The higher mortgage rates of 2024 seem to be fading away as rates have been coming down through the fall. That’s great news for buyers who have been waiting on the sidelines for homeownership to become more affordable, particularly first-time homebuyers.

In addition to lowering mortgage rates, the number of homes for sale has been increasing. One of the major problems in the housing market over the last few years was that there weren’t enough homes for sale to match the number of homebuyers looking. With this increase in home listings, that should become less of a problem. 

This means that buyers will have more choices and won’t have to feel as rushed to beat out the competition for fewer homes. It also should help keep home prices from rising.

How the market might change in 2025

But all of this good news carries a big caveat: an improving housing market means more people will be looking to buy. That means more competition, as more buyers are enticed to start looking for homes due to the lower mortgage rates. And that could mean that the existing inventory of homes for sale could quickly evaporate. If that happens, there won’t be enough homes to match the demand, and it will become a much more difficult environment in which to buy a home, resembling the seller’s market of 2021 and 2022. 

Whether you’re a first-time buyer or looking to upgrade in 2025, preparation will be key. Here’s how to get everything in order before the year’s end to make your homebuying journey as smooth as possible.

Usually, our first piece of advice would be to start your home search by getting pre-approved. But since we’re talking about buying a home next year, you have a little more time and can start getting your financial situation in order before a pre-approval. 

1. Give yourself a financial checkup

When you’re beginning your home search, you should start by evaluating your financial situation — income, savings, debt, and spending habits. How comfortable are you with the idea of putting a down payment on a home and paying a monthly mortgage? Keep in mind that if you’re renting, you can replace your rent with your mortgage payment.

2. Improve your credit score*

Your credit score is one of the most significant factors lenders consider when offering mortgage rates. You can reach out to any of the three credit report bureaus to find out your score for free – Equifax, Experian, or TransUnion. Your score is given in a range of 300 to 850. Most lenders prefer to see credit scores above 720 and may penalize you with a higher rate if your score is below that. 

Start by checking your credit report, addressing any errors, and working on paying down existing debts. Since credit takes time to build, starting early will put you in a strong position to begin the new year.

3. Manage your credit usage

In addition to paying down any existing credit card debt, you should also try getting into healthier habits with your credit cards. Aim to pay off new charges in full each month. Try to keep your credit utilization lower than 30% of your total credit available, as high balances — even if paid monthly — can temporarily lower your score when lenders check. 

Whatever you do, don’t open new lines of credit, like store cards, before applying for a mortgage. New credit accounts can lower the average age of your credit and suggest financial strain.

4. Build up your savings

The more you can pay as a down payment on your home, the lower your monthly mortgage payment will be. So, aim to save up for a larger down payment between now and the time you make your offer. 

Start by spending less and saving more. Consider placing funds in a high-yield savings account to maximize returns before buying. Don’t forget closing costs, typically 2-4% of the home’s price.

While 20% down payment is considered standard, it is by no means necessary or even that common. You can get a loan with as little as a 3% down payment or even 0% if you are a veteran. 

5. Get your documents in order

Having all your financial documents ready is essential for a smooth mortgage process. Lenders will likely ask you to provide the following documents during the application process:

• Proof of income
• Evidence of assets
• Contact information for your real estate agent, lawyer, inspector, and others
• Tax documents, including W2s and tax returns for multiple years

Having these documents ready will cut down on delays and make it easier to submit your application so that you can move quickly.

One way that you can keep your documents ready to share is with our online portal DigitalMove^TM. It puts the mortgage journey at your fingertips at all times so that you can provide the necessary information that your Mortgage Consultant needs as soon as it’s requested.

6. Calculate how much home you can afford

Understanding what you can afford is crucial to avoiding future financial strain. Look closely at how much of your income goes to essentials like housing and debt. Ideally, your debt-to-income (DTI) ratio should stay under 36%, with housing costs alone comprising no more than 28% of your income. Our mortgage calculator will help you create a homebuying budget.

7. Keep an eye on interest rates

Mortgage rates have been fluctuating, but overall, they’ve been decreasing over the last few months. Many experts believe there’s a good chance that they may come down even further in 2025. As rates drop, you’ll want to act quickly to secure the best deal. That’s why it’s so important to have a relationship with a lender like Premia. We’ll be able to tell you when it’s time to lock in a rate!

8. Get pre-approved

Being pre-approved for a mortgage demonstrates to sellers that you’re a serious buyer. Pre-approval gives you a clear picture of what you can afford and can also expedite the process when rates drop, ensuring that you’re ready to move fast. 

Not all pre-approvals are the same, however. Premia will provide a fully underwritten credit approval that can compete with cash offers. The pre-approval letter is good for 90 days and it’s renewable. It’s fast too, with priority turn times to help you become a power buyer overnight. 

Get a head start on 2025

All indications are that the market will be competitive, especially if mortgage rates decline further next year. There will likely be more people looking to buy next year and there’s a possibility that the number of homes for sale will come down. By following these steps, you’ll be able to stay ahead of market conditions and in a prime position to secure your dream home in 2025.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.

Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Premia for current rates. Restrictions apply.

* Premia does not provide credit counseling or credit repair services.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Premia for current rates and for more information. All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Premia Relocation Mortgage, LLC. does not guarantee the quality, accuracy, completeness or timeliness of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Premia Relocation Mortgage, LLC. Premia Relocation Mortgage, LLC. does not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action. Premia does not provide tax advice. Please contact your tax adviser for any tax-related questions.