Waiting and saving to buy first home in 6 mths or 12 mths?

Question

Hi BiggerPockets people!

I would like your advise and opinion on the following:  should I extend my lease for another year in my current apartment or for only six months before buying my first home?  If my husband and I stayed for another 12 months we could potentially build up a saving of $60k-$70k, whereas if we stayed for 6 months our savings will most likely only go up to $25k -$28k. We are so motivated to buy a SF-house/duplex, start house hacking and stop paying someone rent. However, I am more inclined on waiting a year, rake up those savings and have leverage once we see a great deal, whereas my husband is more aggressive and wants to go fully in in 6 months.

What do you think we should do? What makes more sense?

I am happy about every advice I can get. Thanks, Sam.

Samira Schadt · Answer

Hi Dock,

thanks for your reply! Unfortunately the houses here are so expensive and often listed over value, that we were not able to get the VA loan in the amount of the asking price (one house we looked at, the VA appraisal came back with a value of $64k below the asking price). Thus, we need to save some cash.

And no, he is not active duty anymore.

Samira Schadt · Answer

@Peter Mckernan

Hi Peter,

thanks so much for replying to my post. Yes, saving for a few more months will definitely give me a better chance in the bidding war.

Greetings, Sam.

Mike Davis · Answer

@Samira Schadt if there is a VA loan available, I would look to house hack now. If you qualify for an FHA with 3.5% down go that route if you can't do a VA. You need to factor in how much your losing each month buy renting. If you find a multi-unit and live in it, you have to factor the income potential as well.

All told, you can start now to look for a great deal, give low ball offers if you want and see what happens, you may get lucky. Good Luck!

Adam S. · Answer

@Samira Schadt

Given that you don’t have the 3.5% down payment, waiting may be more prudent; however, do you have other options for getting the down payment?

Here’s my thoughts. If you could borrow the DP and money for rehab from family/friends, buy a fixer upper MF property, do the rehab, and then refinance and pay back the DP and rehab costs with interest. In the right scenario, you may get some money back from the rehab while saving money from the difference between the mortgage payment and rent. Not sure if this could work for you.

Dwayne Poster · Answer

I made the mistake of thinking I needed a larger down on my first home. A year later prices had substantially buried anything advantage to that tactic. Be mindful of your cash flow though. Slipping behind can upset the cart even with our best efforts.

Doug Spence · Answer

@Samira Schadt I like your motivation to get things rolling! Have you talked to a VA lender yet? He or she may be able to get you pre-qualified at least so you can get an idea of what your payments will be depending on whats in your budget. Also, if you're buying using your husband's VA loan, you really don't need that much cash to close - not nearly as much as a conventional mortgage. Generally, you'll just have to cover the closing costs. You may not need as much cash as you think and can pull the trigger on the purchase sooner.

Good luck and keep us updated on your real estate journey!

Dock Newell Jr · Answer

Sorry to hear that. It might not have helped since it was a huge difference but there couldve been a rebuttal done. With that said 12 months sounds like the better option. If its the first time he is using the va loan then there is no loan limit since the signing of The Blue Water Navy Vietnam Veterans.

Samira Schadt · Answer

HI Dave!

Yes, the properties I am interested in usually do not range below $350k.

I'll go for the 1-year lease extension and will go hard on frugality:)

Samira Schadt · Answer

Hi Mike,

I appreciate your input! Yes, house hacking would be my ideal scenario. I am definitely over paying rent for a property that is not mine. Unfortunately, we do not even have the 3.5% down payment required for the FHA loan.

Dave Skow · Answer

depends on what  purchase price  ranges are in the area you are interested in .....30K  likely  will not  cover too much  unless  the  pruchase prices  are  very low  in your area ....so likely waiting a  yr  is prob  best

Waiting and saving to buy first home in 6 mths or 12 mths?

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