First-time homebuyers are often tempted to shop for a 'forever home' for their families. Buying a less expensive starter home is usually a better idea.
Buying your first house can be overwhelming on many fronts. Between choosing a neighborhood, picking a home the right size, and making sure you don't buy a "money pit," you may be having second thoughts.
If you're feeling overwhelmed, buying a starter home (instead of a "forever home") is an excellent first step. It's challenging to predict which home your family will be happy living in for many years to come, so instead, focus on something affordable that will help inform your "forever home" purchase in the future.
There are many benefits when buying a starter home. They're typically less expensive, so they provide all the benefits of homeownership but with a lower price tag.
Let's explore the reasons why this may be the best option for a first-time homebuyer.
The Benefits of a Starter Home
Interest rates are still very low, which is a huge help when purchasing a home with a mortgage. The monthly commitment of a mortgage payment is a daunting aspect of buying a home; a lower rate will translate to a reduced monthly payment. While it's tempting to take advantage and use the savings to buy a bigger or more expensive home, try to stay focused on keeping things affordable.
Starter homes should be what best fits your current budget comfortably. They allow you to purchase a home and build equity while continuing to save for a larger home.
There are other benefits if you are considering buying a starter home. In all likelihood, the home you purchase will need a little fixing up – and you'll have the opportunity to ease into maintaining your starter house and learn the basics of home repairs and maintenance by the time you purchase your next home.
Like anything else, purchasing a home has a learning curve. You'll make mistakes as a homeowner, and it's best to practice in your first home and not your dream house.
For example, if your starter home needs a kitchen facelift, and you're not afraid to "roll up your sleeves," it can be an excellent opportunity to improve your handyman skills. Perfect the art of painting in your first house, and learn the basics of caring for equipment and appliances.
Factors to Consider
If you're a first-time homebuyer and a professional, then a condo or townhome may be the best fit for you. Often part of a Homeowners Association, or HOA, you'll enjoy the rewards of homeownership but without the hassle of exterior maintenance.
If you're busy and don't have time to clean your gutters or power-wash your siding, then a Homeowners Association will usually take care of these tasks for you as part of your association dues.
Are you planning on staying in your starter home for five or more years? To avoid capital gains taxes, you may need to. If you move out too soon, you run the risk of paying taxes on any money made on your investment.
Another thing to consider is location. If you can't afford to buy a home in the ideal area you want to live in, then a starter home may be a good fit for you. It allows you to purchase a home until you can afford the neighborhood of your dreams.