Starter Home vs. Forever Home: A Guide for First Time Homebuyers
If you're just entering the homebuying world, you know it can be tough.
There seem to be endless options. Condos, townhomes, a place in the suburbs, a house in the city . . . which is right for you? And should you choose a more temporary home or something more permanent?
When thinking about buying a home, there are specific considerations that first-time homebuyers should make. In this post, we'll go over some of the most important things to think about when choosing between a starter home and a forever home.
Defining Starter & Forever Homes
Before we dive in, let's make sure we're all on the same page with what these terms mean.
A starter home is a home that you buy with the intention of moving in five or so years. Many starter homes or condos are on the smaller and less-expensive side.
A forever home is a home that you intend to live in over the long haul—perhaps 20 or 30 years or more. Forever homes are often large enough for the size of family you plan on having, are in the right location, and include specific details you love.
When a Starter Home Might Be the Right Choice
A starter home is a great option for many first-time homebuyers. Some things that signal that you may want to buy a starter house include:
- You Can't Afford That Forever Home – If you're having a hard time saving up for your dream home, but you want to live in a home in the meantime, this is a great time for a starter home. You'll start building equity, which can help you in your future home purchase.
- You Qualify for a Mortgage – You'll need to make sure that you can make the mortgage payments for a home, which usually means taking out a mortgage. At Elevate Mortgage, we can get you pre-qualified. You should also look around at different programs that help first-time homebuyers.
- Interest Rates Are Low – If you want to take advantage of low interest rates, but you can't quite afford your dream home yet, a smaller, starter home provides that opportunity.
- You Have Some Permanence – A starter home may not make financial sense unless you're planning on staying for at least a few years. Buying and selling costs can be expensive, so renting may make more sense if you're planning on moving soon.
- The Property Is Appreciating – When going for a starter home, check that the neighborhood home market is doing well. You don't want to get a starter home only to realize later that you're going to lose money on the resale, or worse, that you won't be able to sell it at all.
- You Don't Mind Being a Landlord – One benefit of some starter homes is the possibility of renting them out when you are ready to move. Renting a property could help give you some financial wiggle room come time to move and help pay the bills for your forever home. Being a landlord isn't for everyone, but it can sure help you save money.
When a Forever Home Might Be the Right Choice
A forever home works for some first-time homebuyers, allowing them to settle down and avoid moving around as much. You might consider getting a forever house if:
- You're Ready to Settle Down – One of the major reasons to buy a home is because you're ready to put some roots down. You have a steady job and life situation, or maybe you're thinking about kids and you want to really become a part of a community. If this doesn't sound like you—maybe your job is always changing or you like to experience new places—you should probably consider alternatives.
- You Can Afford It – This may seem obvious, but being able to afford a home includes more than just the monthly mortgage. You'll have to furnish the home, pay mortgage fees and costs not included with the monthly payment, take on more responsibilities than you'd have renting, and pay moving costs. Before buying a forever home, you'll need to carefully review your finances to make sure you're truly ready.
- You Qualify for a Good Mortgage – Before you fall in love with a place, you want to be sure that you qualify for the amount you'll need. Credit score, income, debts, and other considerations go into a mortgage lender's decision, and the requirements are usually stricter the larger the loan.
- You Can Rent Out Extra Rooms – You can get help paying your mortgage by renting out the extra space in your forever home until you need it. This isn't for everyone, but it is a good option to have and can help you make use of extra space when you first get the home.
- Rates Are Low – When rates are at their lowest, you don't always know when they might start going up—or when they might come back down. Since you can't always predict what rates might do in a few years, locking in a lower rate now instead of getting a starter home and postponing your purchase might be a good idea.
- You Love the Home – Most importantly, you should love the home you're thinking about choosing for a forever home. Maybe it has the perfect kitchen or you are in love with the wooded property. Or maybe its location and school district are to die for. Whatever it is, if you find the a home you could see yourself living in for a while, you might want to snap it up.
But It's Not All-or-Nothing
Even though we've just spent time looking at starter homes and forever homes as though they are the only two choices for your future home, the truth is that they aren't.
You may be thinking of a starter home as that little condo or a forever home as the mansion on the bench, but there is plenty in between.
Don't feel so rushed to get into that forever home that you end up buying something larger than what you can afford. It's not worth it.
Remember that most people live in a few places before they get into their dream home. And you have the option of renting or choosing less expensive homes until you can save up for that perfect home.
The Bottom Line
Above all else, when making this decision, you need to consider your lifestyle, what you want, and what you can realistically handle right now. Don't rush the decision. Buying a home is likely the largest purchase you'll ever make.
It's a good idea to speak with experts while weighing your options. Professionals can help you take inventory of your life situation and point you in the right direction. However, this is your life, and what you want and feel ready for is ultimately up to you.
Who We Are
Still have questions? Maybe you're unsure of what exactly you can afford or how to start the process? We can help you out.
At Elevate Mortgage Group, we strive to help each client get the right loan for their individual situation. Give us a call or get started online today for expert advice catered to your circumstances.