NerdWallet's Smart Money Podcast - From Broker to Budget: How to Buy or Sell a Home in 2025

Episode Date: March 24, 2025

Learn how to budget for a mortgage, compare lenders, and prep for home buying or selling in today’s changing housing market. How can you shop smart for a mortgage and pick the right broker or lender? How do you budget for a home purchase? Hosts Sean Pyles and Elizabeth Ayoola discuss mortgage shopping and home affordability to help you understand how to make informed, strategic choices when buying or selling a home. Joined by Jonathon Haddad, president of Next Door Lending, and Kate Wood, NerdWallet mortgage expert, they cover how brokers work, what to look for in a lender, and how to avoid common pitfalls when comparing loan offers. They begin with a conversation with Jonathon Haddad about the benefits of using a mortgage broker, how much money borrowers could save, and key questions to ask when shopping for a loan. Then, Kate Wood helps answer a listener’s question about selling a home in 2025, including tips on agent commissions and how market shifts could affect sellers. They discuss how to budget for a down payment, what expenses first-time homebuyers often overlook, and how to know if you’re financially ready to buy.  If you’re ready to find the right mortgage with expert guidance every step of the way, get started today at https://www.nerdwallet.com/prequalify/m/mortgage-experts/lp1  Here’s what mortgage brokers are and how to find one: https://www.nerdwallet.com/article/mortgages/how-to-find-a-mortgage-broker See how far your homebuying budget could take you with NerdWallet’s home affordability calculator: https://www.nerdwallet.com/calculator/how-much-house-can-i-afford  First-time home buyer programs by state: https://www.nerdwallet.com/article/mortgages/first-time-home-buyer-programs-by-state  In their conversation, the Nerds discuss: how to find a mortgage broker, mortgage broker vs lender, mortgage broker fees, best way to shop for a mortgage, how to compare mortgage lenders, mortgage broker savings, mortgage loan estimate tips, choosing a mortgage broker, home buying budget calculator, how to budget for a house, down payment assistance programs, closing costs for first time home buyers, private mortgage insurance, how to prepare for buying a home, home buying tips 2025, first time home buyer loans, FHA loan down payment, conventional loan down payment, va loan down payment, usda loan down payment, home buying closing costs, real estate agent commission 2025, how to sell your house, how to choose a real estate agent, realtor commission changes 2025, selling a house in 2025, how to budget for home maintenance, moving costs when buying a house, first time home buyer help, what credit score do you need for a mortgage To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Sean, you're a homeowner. When you bought your house, how did you make sure you got the best deal on your mortgage? Well, I bought my house in 2021 and was still spending a lot of time holed up in my house due to the pandemic. So I had plenty of time to shop around and compare lenders and naturally build out a very elaborate spreadsheet

with all of my options. Well, that's definitely on brand for you, Sean, and I'm glad that you did your due diligence. -♪ Well, that's definitely on brand for you, Sean. And I'm glad that you did your due diligence. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Elizabeth Ayola. On this episode, I talk with mortgage nerd Kate Wood to answer a listener's question

about how much house they can afford as a first time buyer and Sadly, I'm not there for that conversation But spoiler alert I may make a special cameo and you'll just have to listen to find out what that means exactly but first we're going deep into the nuts and bolts of shopping around for a mortgage including how to get the best rates and what to look for in a broker or lender and joining us in this conversation is Jonathan Haddad, president of Nextdoor Lending, a mortgage broker and wholly owned subsidiary of NerdWallet. Jonathan, welcome to Smart Money.

Thank you for having me today, Sean. So I think a lot of folks might not fully understand the role of a mortgage broker. Can you explain what a broker does and also how they fit into the home buying process as a whole? Mortgage brokers fit into the process as that in-between person to help find the best opportunity for you and your family. It's really quite simple. Over the last

decade mortgage brokers have increased the market share to over 25% which means one out of four homeowners are now using a mortgage broker. Our job is when you come in the door and you fill out your application, giving us all the necessary insights into your life, your income, your property, your assets, and your credit. Our job is to help find the best fit for you and your family. We take this information and we go into the market

for you on your behalf and say, hey, we have this incredible client. Here's their profile. What can you do for them? We find the best lender and the best fit for our consumers to make sure they're getting into the home of their dreams with a price that they can afford at a cheaper than average market price by using a mortgage broker through the wholesale channel.

Got it. So essentially, a broker makes shopping around for a mortgage much easier than doing it on your own, which I know from personal experience can take a long time to do. So beyond saving time, brokers can also save people money. How much money are we talking? So there was a study done and what we did is that they pulled all the data from HMDA. HMDA is where all the data is stored on every closed transaction that occurs in the United States.

They went and looked at what mortgage brokers offer versus anyone in the retail space. I actually spent a little over six years on the retail side of things. Those are your larger banks, larger institutions. And on average, on the wholesale side, you can save on average over $10,000 in interest alone, just by leveraging a mortgage broker. And a lot of it has to do with where they're allocating and putting money.

If you're working with a retail lender, you can only use their products. It's whatever they offer is all you can do. As a mortgage broker, I can find and use the different products of every lender out there, and that means they want to earn your business. And therefore they're going to make their pricing slightly more competitive. And over the life of the loan, that $10,000 is real money that you should be spending on your house, doing

upgrades, putting it away, saving for retirement, saving for your children's school, whatever the case might be, don't let that money go to waste. Let your house work for you. Don't work for your house. That's part of the advantage of working with a mortgage broker.

And so is it basically that borrowers might be able to get a lower interest rate or where exactly is that $10,000 coming from? So the $10,000 is a mixture of the interest rate you get up front and the closing costs you're paying on entering and getting the home that you want of your dreams. Those costs over that 30-year marker of $10,000 is adequate towards that. This information, by the way, you can go Google it. You can look up and see the big study that was done very recently. And there's a study that comes out every single year. What's more interesting with that study for our homeowners out there is we actually see

an increase in savings for minority borrowers and an increase in savings for borrowers that are veterans. So I once did work with a broker when I was looking at homes and I found that I spent quite a lot of time communicating with them and spending time with them. So with that said, what are some things that people should look out for when they are choosing a broker? There are so many things that are going to be thrown your way from every lender that you talk to, every loan officer that you talk to.

And here's the reality of it, okay? If you really want to shop for a mortgage and you want to know what to ask here's what you do. You have to make sure you're calling everybody on the same day and the reason why is rates move with the stock market. So when that stock belt rings at 930 in the morning I'm getting my interest rates at the same time all the lenders are basically getting rates at the same time. So boil it down to your three or four lenders that you want. You're going to want to ask them about how long your loan is locked for.

That's really important because you want to make sure it's locked all the way through your closing date. Number two, you want them to send you a locked loan estimate. So yes, ask for it to be locked so they can't change the numbers on you. And then legally, they have to send you a document called a loan estimate. This document will break down all the fees associated with your mortgage. Now for consumers out there, the fees that are controlled the most by the lender is in the first box that you see on a loan estimate. This is letter A as in Apple. Under here you'll see things like points, you'll see

things like underwriting fees, you'll see things like administrative fees. Whatever those fees are, just know line A is where the actual negotiations can occur. So when you're getting this information back from your lenders, take a look at that line. Make sure your locked loan estimate is in front of you. And then compare apples to apples by just looking at line A.

Everything else on that loan estimate are either third party fees or government fees that must be paid regardless of you doing any transaction. So that's the best way for you to figure out how to shop and get the best mortgage for you and your family. I also wanted to know about the actual broker. So what qualities and characteristics

should I be looking for when I'm choosing a broker to work with? Number one, communication upfront is the biggest piece of it. Number two, I always love asking about their Google reviews. Mortgage brokers, what you will find, really pride themselves on their Google reviews because they really are local to your market. So ask them, how involved are they in the community? How do their Google reviews look alongside of the community?

How long have they been in the industry for? How much do they know about it? How many lenders are they partnered with? Hey, are you just signed up with one or two lenders or do I have the opportunity to work with a plethora of the lenders that are out there and do you have access to them? The other piece of it is what is your weekend availability look like? It's important we're in real estate and at the end of the day Murphy's law is a very real thing. What can go wrong can pop up. Morgage brokers availability is one of the biggest pieces that we offer to our consumers. Making sure that your mortgage broker is not just closed on the weekends, not just closing up shop at five o'clock and having the availability you need for you and

your family to be comfortable going into that house. Those are just some of the areas where mortgage brokers can really help you. And those just some of the areas where mortgage brokers can really help you. And those are some of the questions and things you can ask as a consumer to make sure you're working with the right mortgage broker. That's helpful. I'm wondering also if there are certain types of shoppers who might especially benefit from working with a broker or certain times when a broker might be really advantageous and also on the flip side,

when people might not need a broker. I'm actually going to start from with those people might not need a broker. I'm actually going to start with those that might not need a broker. If you're a consumer that has a lot of money in a specific institution, they'll allow you to borrow against your own assets. It's actually very similar to how a 401k would work, how a specific retirement plan would work. We've seen in many instances where your client looking for a very large home that has a lot of money,

they might be a better fit looking with their local institution where they're putting a lot of their money. It does not hurt to check. There's opportunities for you where a broker might not make sense. Now, for a lot of clients, a mortgage broker will be the best path forward.

If you're a veteran that have ever been denied and you put in your time and you got an honorable discharge, check in with a mortgage broker immediately if you've ever been denied. If you're a consumer in an underserved area that may have not be getting the guidance you're looking for that may have been denied, check in with a mortgage broker. There's many different programs

that mortgage brokers have specific to your state. And you'd be surprised how many people we've been able to help that have been denied in the past. And any consumers go on to Google and just check local mortgage broker near me. If you have a locked loan estimate from a retail lender, just reach out, be honest with them, be direct. Say, hey, I have a locked loan estimate.

I'd like you to do a soft credit pull. It won't hurt your credit. Can you just see what you can do? Here's the deal that I have in front of me. It's locked. It's from retail. Those are three easy consumers that are listening today where you should easily check in with your local mortgage broker. And when someone is presented with the loan options from a broker, how can they ensure that the loans they're seeing are the best ones out there? Because a broker may not show you loan options from every lender available, right?

There's 5,000 lenders. And the reality is you don't want to be checking with 4,999 of these lenders. So whenever you're speaking to your mortgage broker, ask them what is the most important thing to them. And in turn, they should be asking you what's the most important for you and your family. Is it price?

Is it closing on time? Is it value? Is it availability on time? Is it value? Is it availability? Whatever the case is, really make sure that they understand what is important. From there, have them put together at least three to five options for you that's laid out breaking down the interest rate and the potential costs associated with the interest rate. Ask about any of the cons with the associated lenders that the mortgage broker might be picking for you. And just know a majority

of these lenders are all going to be within an eighth of each other. That's one eighth of interest rate. So you have to go in with a little bit of that trust, but it's really important you ask a tremendous amount of questions just to make sure you feel good about the individual that you might be working with. And then on the consumer side of things, how can folks put themselves in the best position to get the lowest rates before working with a broker or even shopping for a loan on their own? The perfect profile. And when I say perfect profile, all I'm saying is when an investor looks at this, they look at your loan and say, okay, this is the least amount of risk possible.

And I want you to think about it as if you were lending out your own money and you were to look at somebody's profile and ask yourself, okay, does this look like a valuable thing for me to invest in? The top of the line for the best price, the best everything for a conventional loan is a 760 credit score with you putting 40% down. That is the absolute best rate you can get. Now, let me be clear, that is not for a majority of people that come in the door.

Myself included on my first several homes, I was not putting that much money down. I was putting roughly 3.5% down, maybe 5% earlier on in my career. For a majority of clients coming in the door, understand that there's opportunities such as down payment assistance products and different ways to help you get in to the home of your dreams. So your credit score will have a big factor on the rate that you get. Your down payment will have

another factor on the interest rate that you get. And those are going to be the two biggest areas. And last but not least potentially your payment history. Have you made payments on time? Even if you've never owned a home before, what does your credit card payment history look like? What is your auto payment history look like? All of that will be assessed to help give you the best interest rate. It's great to hear that folks do have options because to me it seems like getting a credit score of 760 or higher is maybe more attainable than a 40% down payment. I know I certainly didn't have enough money for that

when I bought my house, but I did work hard over time to get that higher credit score, and a lot of folks can do that without spending much money at all. The thing I love about what you mentioned there too, from my side, I'm first generation Middle Eastern American. So my parents were born both in the Middle East. I grew up here, I'm East. I grew up here.

I'm the first one growing up here. A lot of what is taught to a lot of families is that you need to put 20% down and you need to have perfect credit. That was taught in my household growing up. And the reality is most people cannot put themselves in that position. So I really want to help break that stigma of needing 20, 30, 40 percent down to be a homeowner. So don't be afraid of someone saying you have to put 20 percent down. Don't let it scare you. Open the door, go to Google, look up a local mortgage broker,

and at least have a conversation because it is important for you and your family long term. I certainly feel more empowered as someone who is not a homeowner yet, and I'm sure a lot of the listeners do as well. With that said, for listeners who want to learn more about finding a mortgage broker, we're going to link to an article all about that in the show notes. Well, Jonathan Haddad of Nextdoor Lending, thank you so much for joining us and sharing your insights. Thank you, team, very much. I appreciate your time.

Alrighty, we're about to do a timely pivot to a listener's question on how to budget for home and mortgages. Writer Kate Wood is going to help us answer that. But before we get into that, we are at one of my favorite parts of the show, the part where we ask you, listener, to take a second and think about where you need some guidance with your money.

Maybe you're feeling a little lost, like you don't even know what your financial goal should be, or you're trying to break yourself out of a bad financial habit, but just can't seem to do it. Whatever your money question, we nerds are here to help. Leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. And a reminder that one of our goals on Smart Money this year is to talk with more of you

live on the podcast to help you with your money questions. So if you want to hang out with Elizabeth and me for a bit and get some nerdy wisdom, let us know. One more time, leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. Let's get to this episode's money question segment, where we take on one of your questions about how to budget for a down payment on a house and a mortgage payment. That's up next.

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uncompromising. The Range Rover Sport leads by example, just like you do. Build yours today at LandRoverUSA.com. Again, explore the Range Rover Sport at LandRoverUSA.com. We're back and we are answering your money questions to help you make smarter financial decisions. This episode's question comes from a listener's email and is about home buying. Here it is.

Hi, NerdWallet team, first time home buyer here. How do we best budget for down payment and mortgage and what should be the upper limit on our monthly post-tax income that we are paying? Now to help us answer this listener's question on this episode of the podcast, we are joined by nerd wallet mortgages writer, Kate Wood. Welcome back to Smart Money, Kate. Thank you so much for having me. All right.

So the listener has a two part question. Let's tackle the first half to begin with. They want to know how best to budget for a down payment. Now I'd be curious to hear what your thoughts are, Kate, especially with how much the housing market has changed over the past few years. Sure. 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 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. 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 home buyers use, can have down payments that are as low as 3% of the purchase price. There are also FHA loans, and these are often popular with first-time home buyers 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. When you mention a larger down payment, it takes me back to the pandemic times when I was considering purchasing a property and it was a seller's market. I remember larger down payments being a theme and a tip shared by realtors that I work with at the time. Would you recommend people aim to save 20% down payments?

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. 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 are making a serious offer.

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%. Okay, where does the idea of a 20% down payment even come from? And I imagine that sounds intimidating to me, especially with home prices these days, that might be tough to do in this economy for some people.

It is tough to do because 20% of a home price is 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. 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. 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. Mortgage insurance is going to vary between about 0.5% to 1.5% of the amount of your mortgage. Not of the price of the home, but the amount that you actually borrow. 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. In my experience, so back when I bought my home because I was a pandemic homebuyer myself, I got really hung up on avoiding mortgage insurance, and I actually did make a 20% down payment. 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.

That's a fair point, Kate, considering how costly home maintenance can be. That leads me back to the listener's question around budgeting for a home. How can people determine how much house they can afford? Well, an affordability calculator is a great step. 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. 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. You can also use this 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 changed your financial picture a little bit. Now listeners, I have used that calculator and I must say it was pretty handy. Once people have used the calculator and have the numbers in front of them, how can they decide whether to make a larger or smaller payment if they're on the fence? 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. 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 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. 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. 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. So Kate, aside from a down payment, aren't there other costs first-time home buyers need to budget for? Oh my goodness, there certainly are. 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. So that'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. 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. Admittedly, this is something you could have negotiated generally paid the buyer's agent's commission as well as paying their own agent. Now that's something you can negotiate the seller. 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. 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. 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. Now, real estate agents are more likely to want buyers to sign something upfront. So that definitely sounds like a lot more than just the down payment for sure.

And I'm so glad that you mapped that out so that listeners can budget for all those other costs. I also wonder about other expenses that are easy to overlook like moving, for example. I personally moved last summer, but it definitely was a major cost. Yep. You will definitely want to budget for moving, which can get pricey really quickly. Home repairs are another one. 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. 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? Like you are going to feel like Home Depot is an extension of you.

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. 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. Very, very smart. So Kate, what if the listener checks their budget and they realize they do not have much

to put towards saving for a down payment? Now with rising inflation and higher mortgage rates, some people might feel home ownership is just out of reach. That is very relatable and I don't blame anybody for feeling that way. You know, home prices are high in the US. They've been high for 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 3% 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 home buyer assistance programs. So these are available in every single state through your state's housing finance agency. 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. 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. And let me tell you, I love free money. So that is a good plug. Right. All right, so the listener also wants to know what the upper limit on their monthly post-tax income that they're paying should be?

What answers do you have for them? 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. 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? 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. 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. 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 child care costs, and that can be a really big chunk of your budget, but it's not showing up because it's not a debt. 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. So some potential home buyers, Kate, may have entered 2025 excited about the prospect of buying a house since inflation was, I'm going to highlight was, trending downwards. And we seem to be reaching the light at the end of the tunnel. With things changing a little, should home buyers be discouraged with current trends we're seeing? Should they be trying to buy now in case the market potentially gets worse? 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. Kate said it best, guys, no need to panic buy. So what else should people know about home buying in 2025? This is a crystal ball for everybody. 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. I've talked about prices a couple of 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. 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.

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 and that is what could finally create some potential for slightly lower prices. I hope this is some sort of silver-ish lining for prospective home buyers. Before we wrap up, we have a surprise listener question.

Hey, Elizabeth and Kate. It is me, Sean. I'm sorry I can't join you for this conversation, but I have some questions about home selling this year. I'm planning to sell my house in just a couple months and I'm wondering about the best way to do it. I'm probably going to hire a realtor, but I'm wondering what I should be considering as I shop around for an agent. Also, how could the recent change in realtor commissions impact how much I might pay to work with a realtor? And is there anything else unique about selling a house in 2025 that I should be aware of?

I'm trying to sell my house quickly, but not pay too much in fees. And I've also never done this before. So that's why I'm turning to you, my dear nerds. Thank you so much. I can't wait to listen to your answer. Hey, Sean. We've been focusing on how to buy in 2025, but what tips do you have for us on selling, Kate, so we can answer Sean's question? 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. You can go for sale by owner, aka FISBO, but it's a really tough route. Logistically, honestly, I cannot imagine if I 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. 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. 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. That sounds like an ideal situation and a great example of good customer service equating to repeat business. Now, what about commissions if you choose to use an agent? 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. If you were to do for sale by owner Obviously, then you're not paying a seller's agent's commission 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

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. 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 US for such a long time. This was never actually 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. 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. 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 gonna pay for your agent. But if it's a weaker market,

if there are fewer buyers out there, it's gonna be more about what's important to you. Are you potentially willing to wait for a buyer who will meet those conditions, or do you just wanna get the house sold and you'll just pay the buyer's agent commissions out of the proceeds of the sale. So Sean, hopefully you're listening and you know how to move forward with selling your home this

year. And of course, myself and the listeners are invested. So now we need the details on how it goes. Absolutely. I am also so curious to hear more about it. All right, Kate Wood, thanks so much for joining us and sharing your nerdy expertise on home buying. Of course. Thank you for having me. And that's all we have for this episode. Remember listener, that we're here to answer your money questions. So turn to the nerds and call or text us your questions

at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. You can also visit nerdwallet.com slash podcast for more information on this episode. And remember, you can follow the show on your favorite podcast app, and that includes Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. And here's our brief disclaimer. We are not financial or investment advisors.

This nerdy info is provided for general, educational, and entertainment purposes, and it may not apply to your specific circumstances. This episode was produced by Tess Vigeland, Hilary Georgie helped with editing, and a big thank you to NerdWallet's editors for all of their help. And with that said, until next time,

turn to the nerds.