Buying a Starter Home vs. a Forever Home: Weigh the Pros and Cons
If you are preparing to invest in your first home, you’ve probably had the discussion with your significant other or another trusted family member or friend: should you go big or go home? If you rephrase that question, it may sound like “should you fork over the cash for your dream home, or should you settle for a small beginner’s house?” Either way, you’re technically going “home”, it’s just a matter of how big your mortgage will be and whether or not you should throw away your moving boxes or save them for a few years.
Many adults struggle with the debate over purchasing a starter home or a forever home, but most of time it comes down to money. Unless you want to take out title loans, your best bet is to save and purchase what you can afford. If housing prices are high, your credit is less than perfect and you don’t have a large down payment, starter home may be your choice. If the housing market favors the buyer, you have excellent credit and the cash and monthly payment capability to make your forever home yours, maybe your focus is different. But don’t forget these additional pros and cons, questions and answers when making your decision.
What are Your Family Goals?
If it’s just you, or just you and your dog, or just you and your partner, you might only buy a home big enough for your small family to fit comfortably. But what are your goals for the
future? Do you want to have children? If so, how many? Do you anticipate an aging parent or other loved one may need a place to stay? If in the next five years you’re going to need more space, it might be better to look beyond the current square footage of the homes on your list, even if it means expanding your budget. It takes a lot of time and work to both buy and sell a home. If you’ll have to repeat the process in only a few years? Maybe it’s best to compromise between starter and forever home and purchase a middle-of-the-road property you can see yourself living in for at least 10 years.
Is This Your Starter or Forever Neighborhood?
Many people only look at the home’s specifications when determining their like or dislike, but consider the surrounding neighborhood as well. How far of a commute is it to your current job? Do you anticipate changing job locations in the next few years? If so, will that drastically change your commute time? If you have children or plan on having them in the future, do the local schools reach your standards? Is there a gym, grocery store and park nearby for you to enjoy? While these factors are important in both a starter home and a forever home, they may determine whether or not a home fits into either category, or no category at all.
Can You Find a Home with the Possibility of Expansion?
The best of both worlds? Finding a home that fits your space needs and the confines of your budget today, but allows you the opportunity to expand in the future. Instead of saving money to move and start your house hunt all over again, you could find a home you fall in love with then use your savings to finish the basement, add a room over the garage or put in a swimming pool over the next couple of decades. You could end up with a forever home, even if it doesn’t look like one the moment you buy it. If you are considering a renovation or expansion project home, make sure to review local building codes and the plot and plan of the home before you count on this as an option to be sure your dreams can become reality at some point in the future.
Benefits of Sticking to a Starter
Buying a starter home lets a new homeowner experience the process for the first time, from placing an offer to receiving their first set of house keys. It’s an exciting journey, and it’s an educational experience. New homeowners can learn what they like and don’t like about their recently purchased home and decide what they will do differently the next time around. If a starter home is cheap enough, it’s also possible for some to retain the property for rental income instead of selling and using the future cash flow to build equity and fund their dream of a forever home in the future. Starter homes are most likely lighter on the wallet as well, allowing younger homeowners to shed college debt and get stared on their retirement savings instead of wrapping up their entire income in a mortgage.
When Should You Take the Chance on Your Dream?
Obviously, you should not buy a home you cannot afford. You will set yourself up for a high level of stress and possible foreclosure. But in some cases, you don’t have to look for the cheapest house on the market if other areas of your life are coming together and you foresee job security in a reliable industry. Here’s the main thing to focus on: if the difference in price between your starter home and your forever home isn’t that large, it may be worth it to make the larger investment now. You want to have time to spend in your forever home, not wait forever to find it. When you spend money on future improvements, if any are even needed, you get to enjoy it, not simply look forward to the day when you can sell it and hopefully score a profit. You can raise your family and keep your memories intact under one roof.
Only you can be the judge of whether you’re ready for forever, or if it’s best to work your way up the homeowner ladder. Consider each perspective carefully before deciding – purchasing a home is one of the most life-changing financial decisions you can make.