6 min read · Last updated July 13, 2026

In this article

– The starter-home-now math – The wait-and-save math – Starter home now vs. wait and save – When waiting actually wins – FAQ

Priya has $18,000 saved, enough for 5% down on a $340,000 starter condo, plus closing costs. Her spreadsheet also shows that if she waits two years and keeps saving at her current rate, she could have $42,000, enough for closer to 15% down. She assumed waiting was the safer, smarter move. Running the actual numbers changed her mind.

Here is the comparison Priya ran, and the one every first-time buyer facing this choice should run before deciding to wait.

The starter-home-now math

Buying now with 5% down on a $340,000 condo means an $17,000 down payment and a $323,000 loan. Because Priya’s down payment is under 20%, she pays private mortgage insurance (PMI), an extra monthly charge that protects the lender if she defaults, typically running 0.5% to 1.5% of the loan balance per year. On her loan, that adds roughly $135 to $400 a month until she reaches 20% equity through payments and appreciation combined.

The tradeoff: she locks in today’s price and today’s rate, and every payment she makes starts building equity in her own name instead of a landlord’s.

The wait-and-save math

Waiting two years lets Priya reach a bigger down payment, closer to 15%, cutting or eliminating her PMI. But the FHFA House Price Index, the federal government’s benchmark tracker of home price changes, shows national prices rising roughly 4% to 5% a year in recent years. Applied to Priya’s $340,000 condo, a 4.5% annual increase puts the same unit at roughly $371,000 two years later.

Run both numbers side by side. Priya’s larger saved amount of $42,000 against a $371,000 price is still only about 11% down, not the 15% to 20% she was picturing, because the price grew while she saved. She would still likely pay some PMI, just less of it, on a loan that is now roughly $329,000 instead of $323,000. Two years of rent payments during the wait add up too, money that built no equity at all.

Starter home now vs. wait and save

Factor	Buy Now (5% down)	Wait 2 Years (save more)
Estimated price	$340,000	~$371,000 (at 4.5%/yr growth)
Down payment saved	$18,000 (5%)	$42,000 (~11% of new price)
Resulting loan size	$323,000	~$329,000
PMI required	Yes, until 20% equity	Yes, but a smaller monthly amount
Rent paid during the wait	$0	2 years of rent, no equity built
Best for	Buyers who can afford PMI and want to stop the price clock now	Buyers whose income is rising fast enough to outpace local price growth

When waiting actually wins

Waiting genuinely wins in a few specific situations. If you live in a market where prices have been flat or falling, the growth assumption above does not apply, and every extra dollar saved goes straight toward a bigger down payment with no price chasing it. If your income is about to jump significantly, from a promotion, a new job, or finishing a degree, saving faster than prices grow becomes realistic. And if you can qualify for a down payment assistance program in your state, waiting to apply and get approved can beat rushing into a 5%-down purchase with full PMI. Compare your options against down payment assistance programs every first-time buyer should check before deciding your timeline, and budget for the extra costs at signing using what closing costs really run on your first home.

FAQ

Is it always better to buy sooner rather than wait? Not always, but in markets with steady price growth, waiting to save a bigger down payment often means chasing a price that is rising faster than your savings. Run the math for your specific market and income growth before assuming a wait is the safer choice.

What is PMI and can I avoid it? Private mortgage insurance (PMI) is a monthly charge lenders require when your down payment is under 20%, protecting the lender if you default. You can avoid it by reaching 20% down, using a lender-paid PMI option that trades it for a slightly higher rate, or qualifying for a loan program like VA that does not require it at all.

How much do home prices typically rise each year? According to the FHFA House Price Index, national home prices have risen roughly 4% to 5% a year in recent years, though this varies significantly by metro area and can be flat or negative in some markets. Check your specific local trend rather than relying on the national number alone.

Does a bigger down payment always mean a smaller PMI bill? Yes, but the relationship is not one-to-one. PMI is priced as a percentage of your loan balance, so a bigger down payment lowers both your loan size and your PMI rate tier, but if home prices rose while you saved, your loan balance may not shrink as much as you expect.

What if I qualify for down payment assistance? Down payment assistance programs can let you buy with less saved, sometimes with reduced or forgiven requirements to repay, which can make buying now the stronger option even without a large down payment. Eligibility and program terms vary by state and change frequently, so confirm current details directly with your state housing finance agency.

Primary sources: FHFA House Price Index and NAR housing statistics.