New Year, New Home. How to Buy a House in Michigan in 2025

As we step into 2025, the dream of homeownership remains strong, but the path to achieving it has become more challenging. First-time homebuyers face a unique set of obstacles, from high prices and low inventory to elevated interest rates and substantial down payment requirements. Fortunately, if you are a first time buyer in Michigan, there seem to be various programs that have come out and are sometimes available. Overall, with the right strategy and preparation, you can still make your homeownership dreams a reality. Here's your guide to navigating the 2025 housing market. 

Financial Preparation: The Key to Success

Boost Your Credit Score

Higher credit scores will get you a better interest rate. Aim for a score of 700 or above to secure the best rates. If your score is lower, focus on improving it by paying off debts, correcting any errors on your credit report, and not taking out any new lines of credit. We're not credit specialists and recommend speaking to a qualified lender (not credit repair person) about improving your score. While it seems intuitive to pay off a collection or pay down debts, there are strategies involved and sometimes even particular debts you don't want to touch and reopen.

Save for a Substantial Down Payment

While some loans allow for lower down payments, saving at least 20% of the home's price can help you avoid extra insurance costs and make your offer more competitive.

How do you do this in 2025? Oof, it’s tough. Cutting back on expenses is a decent starting point. Things that have become custom like DoorDash, buying coffee and drinks on the run and countless streaming platforms have also eaten into household budgets. It's true, that $8 cup of coffee isn't preventing you from buying a home. However, evaluate how much you are spending per week on non-essentials if you're saving for a house and determine if anything will add to your monthly savings.

If you’re a first time homebuyer, don’t forget to explore down payment assistance programs to reach your savings goal. Lenders in your area will be able to give you more information on what’s available to you. Some of these programs operate as loans—but some are grants that you don’t have to pay back. Other qualifiers like household income, zip code, price of home and so much more can come in to play that you must speak to a qualified lender to know the ins and outs.

Get Pre-Approved for a Mortgage

Obtaining a mortgage pre-approval is crucial in the competitive 2025 market. It shows sellers you're a serious buyer and gives you a clear picture of your budget. Don’t forget to explore all your loan options, including FHA loans, which may offer more lenient credit requirements and lower down payment options. Ask your lender if you can be fully underwritten before house hunting. This little step can help you obtain the winning bid when finances are apples to apples on a multiple offer scenario.

Overcoming 2025's Unique Challenges

Dealing with High Competition and Limited Inventory

In areas with low inventory, be prepared for bidding wars. Work with your real estate agent to craft compelling offers that stand out, potentially including escalation clauses or flexible closing dates. When you find a home you love, be prepared to act fast. However, don't skip important steps like home inspections, which can save you from costly surprises down the line. There are tons of tools in the toolbox that you should never give up an inspection all together just to get an offer accepted. I assure you it's not worth it!

With limited inventory, you might need to compromise on some of your wish-list items. Consider up-and-coming neighborhoods or homes that need some updates to expand your options—you might find a gem you would’ve never considered otherwise. Don't give up the minimum size, number of bedrooms or bathrooms, and things that are very difficult to change. But maybe be more willing to overlook that 1980s wallpaper, a scratched floor or other things that you can live with for a short while as you budget to make those changes later.

Struggling to find a home you love that fits your budget? You might not be working with the right real estate agent. Make sure you have someone on your team that deeply understands your needs and has the connections and expertise to find it. And look out for somebody who isn't willing to spend the time it may take to find the right home for you. 

Addressing Affordability Concerns

Interest rates don't look to be coming down drastically in 2025. Home prices may go up a bit more or at best they'll level out, but they're not dropping to pre-covid pricing. Therefore, homes remain more expensive than ever and the costs to obtain and keep your home is higher than it was a few years ago too. This is the new normal and waiting may only cause it to cost even more in the future.

 Additionally, many federal programs offer loans with lower downpayments and lower interest rates specific to first time homebuyers. Need assistance? Talk to a lender in your area to get all the latest details.

Don’t know any trusted lenders? Get in touch, and I’ll connect you.

Coping with High Interest Rates

While rates are higher than in previous years, remember that you can always refinance in the future when rates decrease—and starting now helps you build wealth. That’s because home values typically appreciate, and building equity by paying down your mortgage and letting your home value grow only starts after you buy. Focus on finding a home you can afford with the current rates. With rates hanging at or above 7%, even a 1/2% drop in the future could make refinancing worthwhile. You and your lender can determine what's best for you when that time comes. Don't expect rates to get back to 4% or maybe even down to 5% but do expect that within the first couple of years of home ownership you'll have an opportunity to refinance and save money.

Final Thoughts

Buying a home for the first time in 2025 may be challenging, but it's far from impossible. By focusing on improving your financial position, working with experienced professionals, and staying flexible in your search, you can navigate the market successfully. Remember, homeownership is a long-term investment, and the effort you put in now can pay off for years to come. As you embark on your homebuying journey in 2025, stay informed, be patient, and don't hesitate to seek expert advice. With persistence and the right strategy, your new year could indeed bring you a new home.