First time homebuyers have a lot to consider. One of the biggest decisions they need to make is: Starter Home or Forever Home
Do you purchase a starter home before you can afford the size and style of house you actually want? Should you focus on finding a more expensive forever home even if it means stretching your budget?
It’s important to consider where you are in life.
Buying and selling a home is stressful and can certainly stretch your finances. Whether you’re single or a young couple starting out, life’s circumstances can change fast. Do you plan on having children in the near future or switching jobs? If yes, then a starter home might not be the best option for you.
On the other hand, if you’re just starting out and looking for a home that’s perhaps a bit smaller than what you wanted or a little farther from your work than you had planned, a starter home can be a great investment and a great way to get your feet wet with being a homeowner.
How are your finances and the current real-estate market?
Does it make financial sense to make the move when mortgage rates are considerably low and housing prices could potentially get higher? In highly desired areas, the inventory for good houses might be low which in turn might lead to prices going up. Regardless of what route you go, you should plan on your mortgage not equaling more than 28% of your income. Perhaps waiting a bit longer to purchase so you can increase your down payment is more beneficial for you. The larger the down payment, the smaller the mortgage.
It’s always important to have a plan in place just in case your circumstances should suddenly change. Will you be able to sell your property and make a profit? Will you have enough equity to put a sizable down payment on a new property? If you won’t be able to make a profit, what’s the rental market like in your area? Are you willing to take on the role of landlord? Perhaps you could rent out your starter home to cover your mortgage until you can make a profit.
Becoming a homeowner is exciting, but you need to take the time to consider the positives and negatives of a starter home vs a forever home as they pertain to your circumstances. Look at where you hope your future will lead you, and only then can you make an educated decision that suits your needs.