When buying a home for the first time, it is undoubtedly one of the largest purchases you will make in your lifetime. However, this doesn’t mean it has to be the only time you buy a home.
With mortgage rates at a new low and the Real Estate market booming, the possibility of owning a “starter home” is more likely than ever before. Is a starter home the right choice for you, or should you wait to save for your forever home?
A starter home is a house that you know will fulfill your needs for a handful of years, but you will start to outgrow. A “fixer-upper” can also constitute a good starter home.
By investing in a starter home now, you could even save yourself money in the long run. With interest rates being as low as they are now, your monthly mortgage can even be LOWER than what you are paying in rent currently.
Additionally, when it is time to say goodbye and move on up to your forever home, you have the option of selling your starter home or keeping it around as an investment property. Who wouldn’t want someone else paying their mortgage for them?
If you are planning on buying a “fixer-upper” as your starter home, make sure you research if the money you put into improvements will contribute to the home’s resale value.
Your forever home is where you envision raising a family and hosting countless holidays and family gatherings. This doesn’t mean you will live there your entire life, but you can expect to spend about 20 years or more in your forever home.
However, the cost for a home large enough to comfortably house a growing family requires a down payment that most young adults can not afford, even with a dual income. That is why many choose to rent while they save up for a large home purchase.
The plus side to waiting is that the larger your down payment is, the smaller your mortgage payments will be. Still, this could mean you risk waiting for the market to turn cold and missing out on the right opportunity to become a homeowner.
The middle ground
A good way to decide which home purchase you are ready to make, is to look at properties online. Select a home you would consider a good starter home, and one that would make a good forever home. If the price difference between the two could be saved up in a year, it is safe to say you can stand to wait it out.
However, if it would take several years and a few job promotions or raises to afford the difference, a starter home might be your calling. A small condo or townhouse just slightly outside of your desired commute may be enough to save up sooner rather than later for your dream home.
The most important thing to remember when shopping for your first home is to always go into it with an open mind. Sometimes, certain sacrifices are worth making for a better, and smarter, foreseeable future.