There are many decisions involved in buying a home.
First up is deciding whether to buy a starter home or rent. Once you’ve made the call that you want to be a homeowner, the big question becomes whether you should buy a starter home or go ahead and choose a forever home.
What is a starter house? For first-time homebuyers, a starter home is an entry level property. It’s typically smaller and less expensive than your dream house. The positive of a starter house is that it costs less, allowing buyers to purchase and own a property without busting their budgets.
Some shoppers forgo buying a starter home and jump straight into a forever home, which is a house they can live in for the rest of their lives. Which idea is best? Deciding on a starter home vs. a forever home is easier if you answer these questions:
How much of a commitment can you handle?
If you’re ready to settle down and live in one area for three or more years, you’re probably mentally ready to buy a house. Yearning to travel for a year or start a business on your own doesn’t scream that you should invest a large chunk of your money in a home. The more committed you feel to an area, the more you should consider buying your forever home.
How much house can you afford?
Look realistically at your budget. Sure, you may be able to afford a forever home’s monthly payment, but can you swing all the extras? Insurance, taxes, upkeep, and utilities? A starter home may also give you the freedom to still take vacations, enjoy dinners out, and pay off your student loans faster. The biggest mistake to avoid is tying yourself up so tightly with a forever home that you feel trapped in it.
What are the estimated maintenance costs?
Starter homes might be fixer uppers. While you may think you can do most of the work yourself, are you going to actually have the time and inclination to do that? It might make life simpler to opt for a forever house that doesn’t require renovations.
Either way, think about how much it will cost to keep the landscaping looking good, the paint fresh, and everything else updated and in working order. This is a big area some homeowners forget about when making their purchasing decisions.
What is your job situation?
How secure is your current job? What’s the likelihood of getting transferred? Buying a starter home makes more sense if you’re planning to stay in your city for just a few years. However, if your roots are deep and you have no intention of ever moving out of the area, a forever home may be a better move.
Our argument for this is that moving is expensive. Real estate agent fees, closing costs, appraisals, moving expenses, and other fees add up during the purchasing process. If you’re not planning to move, save a bit longer and buy your forever home.
What are the market conditions?
If you’re dealing with a hot market, prices tend to go higher and it may be more difficult to afford a forever home. In this case, a starter home might be your best decision. On the other hand, you may be able to pick up a larger, forever house in a sluggish, slow market for quite a bit less than you expected.
Interest rates are also something important to consider. If rates are at historic lows, locking in a forever home could save you several thousand dollars over the life of the loan. High interest rates may prompt you to shop in the starter home price range to keep those payments low and more in line with your budget. A reputable mortgage originator can lay these scenarios out for you.
Do you have any upcoming lifestyle changes?
If you’re single with no plans to get married, or married with no plans for children, a starter home is perfect for you. Unfortunately, you may outgrow a starter house quickly if you’re planning to marry or start a family soon. If your family is growing in the near future, a forever home might be a better choice for you.
Choosing between a starter home or a forever home is a personal decision that demands a great deal of thought and consideration. Weighing all these questions against your budget is essential in making the best choice that fits what you want, your lifestyle, and your budget.