If you’re a prospective first-time homebuyer, you may be wondering: Do you buy a starter home now or save up until you can afford your “forever” home?
The key difference to a starter home and a forever home is the length of time you intend to live there.
A starter home is something you’d be happy living in for around five years before moving somewhere new. A forever home, on the other hand, is one that you could potentially see yourself living in at least the next 20 or 30 years.
Here are some factors to consider as you weigh the tough decisions on whether to get a starter home or a forever home.
Why Choose a Starter Home?
It Could Cost Less
One of the great things about a starter home rather than a forever home is that it will generally cost less. This may be especially helpful to Millenials and first-time homebuyers that may not have a hefty savings account yet.
In fact, there are some great mortgage options out there, such as the FHA loan, which has a minimum down payment of 3.5%. So, if you are looking to save your money for the future, a starter home may be the perfect choice.
Cheaper Than Renting
If you compare being a homeowner to a renter, homeownership usually takes the cake on cost. Depending on the real estate market, you may end renting at a premium rate compared to how much it would cost to own a home of similar stature.
In addition, homeownership provides you with the opportunity to build equity. You can get a return on your investment this way, but not when renting.
A great benefit to buying a starter home is the opportunity to renovate, which will increase the home’s value once you’re ready to sell. You can work on curb appeal, such as landscaping or adding on a porch. You can also remodel the kitchen or bathroom, which will potentially provide a big return.
Why Choose A Forever Home?
Maybe you spotted your dream house and can’t imagine passing up the opportunity to live there. Here are a few points to consider when deciding if the time is right for a forever home.
You Have or Plan to Have A Big Family
A starter home may be a fine choice for someone with one child, but it can be tough to add more to the mix with the limited space the starter home provides. If you know you want to have a large family within several years, you may realize that a starter home won’t meet your needs and instead may want to look for something that you’ll be able to live in for a longer period of time.
Favorable Market Conditions
We all know that the real estate market constantly fluctuates. Buying when the market conditions are good means you should be able to get more house for your money, making it a good time to consider a forever home. The lower the interest rates, the smaller the monthly mortgage payment.
If you fall in love with the perfect home, and you have extra space, you could become a landlord and rent out a portion of the home to help cover your mortgage payments. This is especially ideal if you have a basement with a kitchen and bathroom included with separate doors to ensure privacy.