‘Do I Need to Buy a Home Before the Baby Comes?’

I am pregnant, due in December, and want to buy a home with my partner in the next few months. We currently live in Chicago in my studio apartment, which I bought in cash (with considerable help from family) before we met. We like our neighborhood, but the space is pretty cramped and it’s hard to imagine how we’d have a baby here comfortably. We’ve also been saving up to move for a while; I just got pregnant sooner than we expected! So we’ve got a deadline and some savings — about $100K from him, plus whatever we get when we sell my place, which will hopefully go for around $150K based on what I’m seeing on Zillow. 

I’m not exactly sure how we should go about this, though. We know we want to stay in the same area and have at least two bedrooms. How does the timing work with putting my apartment on the market and finding and buying a new place? Should we try to pay as much as possible in cash, or is it better to get a slightly bigger mortgage than we need so we can keep some cash reserves? What can we afford? I know interest rates are pretty high right now — how does that affect things? We both make about $80K to $100K a year, including bonuses. I know the housing market has been weird for a while, too. Is this a bad time to buy a house or a good one? 

First of all, congratulations! And second, I understand the nesting impulse. It’s a cliché, but I spent my final weeks of pregnancy possessed by a hormonal demon that compelled me to fold and organize tiny baby clothes and heave Ikea furniture into different nursery configurations. To be clear, I don’t recommend moving a rocking chair when you’re nine months’ pregnant, but I know how it feels to want everything to be as perfect as possible before a baby explodes your life.

After my son was born, I wound up dressing him in the same five onesies over and over. I left the rest of his clothes untouched, still arranged neatly in their drawers. Overall, I used about half the baby stuff people had given to me. My point is, it’s hard to anticipate exactly what you will need as a parent until you become one. Trying to find the perfect home for your future family under a tight deadline may not be the best use of your time and resources right now. To weigh your options, I spoke to Valerie Rivera, a certified financial planner (and a mom) based in Chicago.

Rivera recommends that you explore more temporary solutions — namely renting — before you commit to buying a bigger place. “Your next home may be the biggest purchase you make in your life, and this is a very short timeline for such a major decision,” she says. Of course, it’s understandable that you want more space, so she advises putting your current apartment on the market as soon as possible. “Then you can move into a rental before your baby comes,” she says, “which will give you more flexibility in figuring out what your priorities will be in your home-buying decision.”

Meanwhile, game out your month-to-month expenses taking your future child into consideration. “If you or your partner is going to stay home with the baby, that will affect your household income,” Rivera says. “Or if you’re hiring a nanny or bringing your child to day care, run the numbers on what it will cost and get on a wait list if you need to.” If you have family members who are volunteering to take on child care, that’s wonderful, but make sure you’re clear on what that will look like. “I’ve had multiple clients move closer to family because they thought they would help out, but then they didn’t or weren’t able to,” she says.

Your household savings is impressive. But you should consider how your monthly income factors into what you can afford. Some rough math: Conservatively, let’s assume your annual household take-home pay after taxes is about $110K. That shakes out to a little over $9,000 a month. “You should put at least $1,000 of that away for retirement, which leaves you $8,000. Then, realistically, day care will cost about $1,700 to $2,000,” says Rivera. “Based on that, I’d try to keep your housing costs — either for rent or a mortgage — to about $2,000 a month so you have at least $4,000 for everything else.”

If you have your heart set on buying your next place and you’re seeing listings you like, it’s certainly doable. This budget would enable you to afford a $300,000 home pretty comfortably, assuming a 20 percent to 30 percent down payment ($60K to $90K) and a 30-year fixed-rate mortgage (play around with mortgage calculators to double-check the particulars, including taxes, maintenance fees, and closing costs). “I wouldn’t spend much more than that, based on your income,” says Rivera.

She also encourages you and your partner to spend the next month creating a list of what you’re looking for in a place to live. What’s the proximity to work and child care? What’s the laundry situation? Where could you put a stroller? “Once you have that nonnegotiable list, see what properties come up in your price point,” Rivera says. You may also want to sit down for a session or two with a fee-only financial adviser who can give you a more tailored plan.

Whether you rent or buy, this budget takes some pressure off the sale of your current apartment, which is a pretty big question mark — you’re not sure when it will sell or exactly how much you will make from it. The good news is that even if you can’t sell your old place in time to buy a new one, you could use your partner’s savings for the down payment and replenish your cash reserves after the sale goes through. You could also use some of that money to pay down your mortgage faster. No matter what, you should keep a sizable emergency fund handy, especially with a baby in the picture. It’s better to borrow more than you think you need and pay it back more quickly than to get stuck in a house-rich, cash-poor situation, says Rivera.

You asked if this is a good time to buy. It’s a tough question, and the answer is: No one really knows! Mortgage rates aren’t exactly favorable to borrowers right now, but if they decrease in the future, you can always try to refinance, says Rivera (she recommends using a local credit union, which may be able to offer better terms than a big bank). Ultimately, you can’t live your life based on interest rates or trying to time the market. Sometimes you just need to move forward, even if circumstances and solutions aren’t perfect.

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