Should I Save for Bigger Down Payment or Just Go for It?

Your new paycheck is a lot larger than your old one. You’re finally moving forward in your career, and you have the cash to show for it. While you were working your way up, you saved a little here and there, confident that you’d be able to buy a house some day. Well, congratulations, because “some day” is here!

But should you keep saving or go for it? There are a few reasons to wait:

• A longer employment history may get you a lower rate on your mortgage.
• A larger down payment can get you a lower rate and lower your monthly payments.
• Waiting may help you qualify for more house. Sure, you could buy right this second, but if you wait a while, you’ll have more choices.
• Moving is stressful, so is starting a new job, even if you’re happy about both of them. You might want to take a minute to get used to your new job before you add to your stress level.
• You’ll want to look at a lot of houses, so see what you like and don’t like, and you may not be able to take time off work to do that.

But there are always reasons to buy right now, or at least start your search!

• If your credit is great, and your salary is large enough, you might be perfectly happy with the terms of the mortgage you’re offered.
• You might qualify for a lower rate if you get an ARM.
• If rents are particularly high in your area, or if you just hate your place, building equity is usually more satisfying than paying rent.
• If you do get an ARM, or if your rate isn’t what you hoped for, you can always refinance in a few years, when your employment history may qualify you for a lower rate. (There’s no guarantee that rates will drop, of course, so find out what the worst case scenario would be.)
• You may not qualify for as large of a loan now, but if your paycheck is big enough, you can overpay your mortgage every month and build equity faster. (Just make sure there isn’t a penalty for prepayment.)