Q: Two years ago, my husband and I graduated from college. My husband is now a graduate student, and I work for a publishing company.
We have about $40,000 in savings and $20,000 invested in stocks and mutual funds. My husband will graduate from grad school debt-free in a little over 4 years.
In January, we were preapproved for a $100,000 mortgage, but we’re having trouble finding a condo in a safe neighborhood in our price range near where we work in Dallas, Texas.
Should we continue to rent for the next 4 years, or are we doing ourselves a disservice by not buying? We don’t want to get a larger loan. After my husband graduates, we will probably have to rent for an additional 2-4 years while he does a “post-doc” in a different part of the country. Then we hope to settle down!
Thank you for your help!
A: It’s disappointing that you’re able to qualify for a $100,000 mortgage, and have an additional $40,000 to put down on the property and you’re still unable to find a condo that works for you.
But that’s the reality of the real estate market these days, particularly in communities like Dallas that have seen home prices shoot up over the past decade.
If you don’t want to take on any more debt (and I’m cheering for you on that end), then I’d focus on renting and graduating from school debt-free. If you buy a property that costs more than that, and have to go deeper into debt for the house and take on costly school loans, you will more than likely offset any good that comes from owning versus renting.
Despite what you hear, there are good reasons to rent and you’ve just named several in your letter: Financially, you’ll be stronger if you rent than own, and you’re not yet settled into the place where you’ll live for the next 5 to 7 years and in the meantime you’ll live in an area that suits your needs better than if you owned a home.
In the future, when those pieces of the puzzle are in place, it’ll be the right time to buy a house.
As for the terrific job you’re doing of saving and investing your cash, keep going in that direction. When the time comes to buy a home, you’ll be in the driver’s seat with plenty of cash in hand for the down payment.
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