The Baby Timeline

Tom and his wife have $13,000 in the bank and $35,000 in a Roth IRA. They have no debt and a baby due in January. He is in the military and wonders if now is a good time to buy their first home.

QUESTION: Tom in Oklahoma and his wife have $13,000 in the bank and $35,000 in a Roth IRA. They have no debt and a baby due in January. They are able to put $3,500 in their savings account each month. He is in the military and wonders if now is a good time to buy their first home. Dave cautions about factoring their baby timeline into the deal.

ANSWER: I think it’s a great time to buy a house. If your wife is due quickly, you need to get the house bought soon or you need to wait until after the baby comes. Moving is stressful; moving and pregnant puts stress into the stratosphere. You don’t want a lady in the third trimester moving into a house. This is just an old married guy to a young married guy—don’t do that to yourself, much less her. You will meet parts of your wife that you never want to see again if you do this. Get the move done or wait.

It is a great time to buy. Interest rate rates are great. Prices are recovering, but they are still good. You can get good deals, and you can certainly get a good interest rate out there today. The bad news is that the VA loan is not advantageous. It was set up to be advantageous, but honestly the program is run so poorly that it’s not. It allows you to buy a home with nothing down, which is nice if you want to put nothing down. I want you to put a lot down so you can avoid debt.

But the interest rates are not competitive and the fees are higher. While it was set up to be a benefit to people who have served their country, and it should be, it’s just not. It’s a bad loan.

I would recommend a standard, conventional mortgage rather than a VA loan as well as a solid down payment without touching your emergency fund.

If you have $3,500 a month to save from now until after the pregnancy, you’ll easily have $20,000 saved for a down payment, which is what I would do. You need the down payment and you don’t want to move late in the pregnancy. It’s too much trouble.

If you are going to be moved in the next three years, that can be a problem, too. What you want to think about there is are you going to be able to sell the home for enough when you move to offset the costs that you got on the buy and the sell. Most areas don’t appreciate enough in three years for you to justify owning.

We work with the military a lot, and we run into people who get stuck in houses. The next time you transfer, you have a house in that next place and the next place. They end up with rental properties dotted all over the nation because of houses they couldn’t sell every time they get a new assignment.

I’m not sure I would be a buyer. Unless you can get into an area that is rapidly going up in value, I probably wouldn’t be a buyer at this stage of the game. I would be a saver to purchase a home someday when you leave the military.