You’re already visualizing your dream: owning your own house. A space for you to call your own. A place you can design to truly be your own. That’s the goal for many new homeowners.
You might be fortunate enough to buy your dream house as your first home purchase, but another fulfilling journey for many first-time buyers is finding a starter home that suits your current needs and puts you on the path to moving up to a larger or better home later on.
A home is the single largest asset for many people, so utilizing that equity and planning for long-term goals will help you ultimately reach that accomplishment of walking through the doorway into the dream home you’ve always wanted.
In this post, we will explore how a starter home can help support your long-term homeownership goals, and key points to consider when using this home selection strategy.
What is a Starter Home?
A starter home is a term utilized to describe some buyers’ first home purchase. It’s typically a condo, townhome, or single-family home that you can easily afford but will probably outgrow. They may fall on the lower end of your budgeted price range, but don’t necessarily have to be in need of a lot of renovation or maintenance work.
It probably won’t have every feature or aspect you’ve envisioned for your forever home, but it’s a comfortable entry point that will allow you to become a homeowner without adding an overwhelming financial burden.
WHAT IS A FOREVER HOME?
After understanding the term starter home, you’re probably then wondering what the term forever home means. Many in the housing market use this term to refer to a buyer’s dream house. This is one you can see yourself wanting to stay in for the foreseeable future.
It will usually tick all the boxes for amenities and unique characteristics that come together to form the complete package for you. Don’t confuse that with thinking it has to be the most expensive property, though. Your forever home can be within your current budget because you get to set the priorities for what a forever home means for you.
SHOULD MY FIRST PURCHASE BE A STARTER HOME?
You can think of a starter home as the perfect way for you to wade into homeownership, like how you might slowly make your way into a cold swimming pool. Making your first home purchase with a starter home often helps ease budget concerns and acclimates you to homeownership expenses like repairs and maintenance while also keeping your future goals in mind.
You’ll be able to enjoy life as a homeowner while equity in your home builds up, allowing you to leverage that for a move-up purchase later. And, when you’re ready to transition to a larger or different type of home, you can sell or rent out your starter home, utilizing your home equity.
Things to Consider When Buying a Starter Home
If you’re leaning towards purchasing a starter home to kick off your homeownership journey, we recommend thinking through these important considerations, both before your initial purchase, and later on as you make future move-up purchase decisions.
USE YOUR BUDGET AS YOUR GUIDE
For new homeowners that begin their journey with a starter home, budget often plays a large role in that decision. To get the most accurate picture of how much you can afford, we recommend getting pre-qualified or pre-approved. Once you know how much you can realistically finance, you can firm up your overall homeownership budget.
Be sure to check in to compare how your purchase price and other costs are evolving throughout your buying process, comparing them against your original budget. This will ensure you stay on the lower end of the price range, allowing you to continue working towards your forever home.
REMEMBER YOU’LL OWN YOUR STARTER HOME FOR AT LEAST A FEW YEARS
While price will be a driving factor in buying a starter home, don’t forget that you will call this space your home for at least a few years. It should be comfortable and meet your basic home needs and expectations because you’ll want to enjoy your time spent at home.
If there’s a possibility your home needs will change in the next two years, you may want to reconsider the home you’re thinking about purchasing. It will take a toll to get settled in just to move again in the short-term. You can also be subjected to capital gains taxes if you sell too quickly and can’t qualify for an exemption.
KEEP RESALE POTENTIAL IN MIND
To leverage the equity you’re building up in your starter home, you’ll need to either sell it or rent it out to take the next step and move-up to your future home. To that end, consider aspects like the neighborhood, nearby attractions, the condition of the house, and any unusual features that could help or hurt your resale potential.
You can look up home sales data in your area to get a handle on the average appreciation and the overall trends. Keeping an inventory of these will prevent headaches and stress, and set you up for success in your future homeownership endeavors.
REMEMBER YOUR GOAL OF THE FOREVER HOME
If you decide to go the route of a starter home, remind yourself from time to time of your end goal. Close your eyes and envision those aspects you want in your forever home. That will help you keep things in perspective and remind you what you’re working towards.
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Buying a starter home is just one path to homeownership. Now you know what to expect when beginning your homeownership experience with a starter home, and considerations you should be prepared for. Take some time to speak with a loan officer on our team to discuss your personal situation and find the best homeownership path for you.