With mortgage rates falling this may be the year prospective homeowners who have been sitting on the bench to finally get a shot at a new home.
But whether you’re a first-time buyer or a homeowner looking to make a change, landing in a new home this year will take specific financial planning.
Forecasts are optimistic, but the reality is that if you don’t have your money squared away properly, when your dream home presents itself, you won’t be able to make an offer.
But financial experts agree that there are moves you can make right now to ensure you’ll be prepared.
Take stock of your finances before you start house hunting
Make one of your January resolutions a full financial checkup, before you even start to browse listings.
Ask yourself some key questions:
- How much do I have in savings right now?
- How much of that is earmarked for a down payment versus emergency savings?
- Am I contributing enough to retirement—and can I buy without sacrificing it?
When it comes to savings, it’s important to remember that you’re working toward saving not only for a down payment, but also for your emergency fund, maintenance fees, and at least a few months of housing payments.
If those funds are secure, how much you have saved for a down payment or need to save really depends on what kind of loan you’re looking to secure. Government-backed loans like FHA, VA, and USDA loans have more flexibility, with the latter offering mortgages with 0% down.
But when it comes to conventional loans, you’ll need to have more saved, between 3% and 20% of the home purchase price. And even if you qualify for zero or low down payment, Martin explains you’ll still need to think about escrow money for taxes and insurance.
Furthermore, you shouldn’t be saving for just the down payment, but also for other important financial responsibilities.
While mortgage rates are indeed still elevated, there is also a plethora of insurance and property tax volatility across the country.
For example, in Florida, Gov. Ron DeSantis is pushing to eliminate property taxes on homeowners in the state. However, a new analysis suggests that the move would come at a high cost for first-time homebuyers, with home prices increasing.
On the flip side, the average property tax bill in the U.S. rose to $3,500 in 2024, a 2.8% increase from the year before. In North Carolina, some counties saw property values rise by 25% to 88%, leading to bigger tax bills.
How much home can you actually afford?
When you apply for a mortgage, the amount your lender approves may not actually reflect real-world affordability.
Most first-time homebuyers are caught off guard after their offer is accepted by the full cost of buying a home, beyond the purchase price.
Closing costs, prepaid taxes and insurance, and even real estate agent commissions are all costs tacked on after the purchase, and you should have enough money to cover them.
Buyers need to stress-test their budget going into the new year, taking into consideration rate changes, tax increases, or income shifts.
The good news is, according to the Realtor.com 2026 housing forecast, rising incomes in the new year should outpace inflation, giving buyers more purchasing power. The monthly payment to buy the typical home is expected to slip to 29.3% of the median income, according to the analysis. This would mark its first year below the 30% affordability threshold since 2022, when mortgage rates were much higher.
Still, it’s important to be realistic.
So, with this in mind, as you start to plan your savings journey, use a mortgage calculator to get a full picture of your buying power. This will help you decide just how much house you can actually afford, taking into consideration all financial obligations.
Check in with a tax professional before you buy or move
As you’re starting to prepare to file your 2025 taxes anyway, it would be wise to have a conversation with your CPA or tax adviser on the realities of buying a home in the new year.
If you work with a local adviser, you will be able to ask the pro questions about upcoming changes to state and local property taxes, as well as how mortgage interest deductions would affect your returns.
Your adviser could also potentially walk you through some of the changes on a federal level as well, like the upcoming SALT caps going into effect in 2026.
Find a real estate agent who respects your budget and the reality of today’s market
Once you’re comfortable with your financial situation, find an agent who won’t be just a tour guide, but also a partner in this journey.
You should be upfront with your budget constraints and comfort level when it comes to managing expenses like maintenance costs and taxes.
You can start by asking your agent some smart questions:
- How are you helping buyers stay competitive without overextending financially?
- What concessions or negotiation strategies are realistic in this market?
- How do you advise clients who need to walk away from a deal that no longer makes sense?
If you have your finances in order and a skilled agent in hand, you’ll be ready to hit the ground running as the selling season starts to pick up this spring.
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