“Would it make more sense to rent for another year or put 25k down on a house and buy in Feb-March when our lease is up?”: My wife and I are unsure about whether to buy a house now or wait. What should we do?

Hi Money Minder,

I’m in a bit of a pickle and could really use your expertise. My partner and I are both 29 and currently bringing in a combined income of 125k (yay us!). She just finished her masters and is looking at a sweet 40k pay raise in the next couple of months. We’re debt-free except for her car loan (25k). Our monthly expenses include 500$ on groceries, 200$ for cell phones, 500$ for the car, 1800$ for rent, and some extra for our fur babies, gas, and weekend indulgences.

We’ve got about 30k in cash sitting in our accounts, and now that the studying phase is over, we’re thinking of starting a family. So here’s the big question – should we rent for another year or take that 25k and put it towards a house down payment? Our lease is up in Feb-March, so timing-wise, that could work for us.

We’re complete newbies when it comes to finances and haven’t consulted any experts yet. We also haven’t started the mortgage process. We do have 401k’s, which we could dip into for the down payment, but is that a wise move? My credit score is 799, hers is 780, if that helps.

My goal is to keep the mortgage around 2k (similar to our rent) and avoid PMI, so part of me thinks waiting it out for a year, saving up that 20%, and getting a nicer house might be the smarter move.

Phew! That was a lot. Any thoughts or advice on this would be hugely appreciated. Thanks a bunch in advance!

Cheers,
House Hunter Harry

Response from THE MONEY MINDER:

Hello There,

Hello, it seems like you and your wife have a good foundation in terms of your financial situation with stable incomes, no student loan debt, and some cash savings. Firstly, congratulations on your wife completing her master’s degree and expecting a pay raise soon. It’s wonderful that you both are thinking about starting a family.

In terms of your question about whether to rent for another year or put a down payment on a house, it’s essential to consider a few factors. Given your plan to start trying for a baby, it might be prudent to wait until your wife’s pay increase is in effect and you’ve saved up more for a down payment. Buying a house is a significant financial commitment, so having a substantial down payment to avoid private mortgage insurance (PMI) and secure a more comfortable mortgage payment is a wise move.

Since you mentioned wanting to keep the mortgage payment around what you’re currently paying for rent, it makes sense to aim for a lower monthly mortgage amount by saving more for a down payment. Additionally, accessing your 401(k) for a down payment should be carefully considered, as it may have implications on your long-term retirement savings.

Given your current financial situation and your goals, it may be beneficial to speak with a financial advisor or planner to help you navigate the process of buying a home while considering your future plans of starting a family. They can provide personalized advice based on your specific circumstances and goals.

All the best from THE MONEY MINDER on your financial journey, and I hope this information helps you make an informed decision. Feel free to provide more details if needed to receive further guidance.