Should You Buy a Starter Home or a Forever Home?
At the start of their journey, many first-time homebuyers are often faced with a big choice. Do they buy something smaller and more affordable to get their foot in the door of homeownership? Alternatively, do they wait and save up money until they can afford a home that they can see themselves staying in long-term?
If you’re wondering whether you should buy a starter home or a forever home, keep reading. We’ve laid out what each of these real estate terms means and the pros and cons of choosing each option. Armed with this knowledge, you should better understand which option might make the most sense for you.
What is a starter home?
As the name suggests a “starter home” is often the first home that buyers purchase. These homes generally tend to be smaller and more affordable. Though it’s not always a requirement, they may need a little more TLC than other homes on the market. However, condition aside, they allow first-time buyers an entry into homeownership.
Typically, buyers do not intend to stay in this home for more than a few years. Rather, they intend to move to another property once their needs or life circumstances change. At that point, they have a choice of either selling the home or keeping it in their portfolio as an investment piece.
What is a forever home?
Forever homes, on the other hand, are usually purchased after buyers outgrow their starter home. As a result, they are likely to be larger and more expensive than starter homes. They’re also more likely to be in better shape and showcase higher-end finishes.
Typically, buyers tend to plan to stay in these homes for the long haul. Forever homes are places where buyers raise their families. Usually, by the time buyers are ready to move on from their forever home, their children have grown up and they’re ready to retire into something smaller and more manageable.
Signs a starter home might be right for you
- You are ready to achieve your dream of becoming a homeowner, but you also want a smaller mortgage payment, down payment, and property tax bill.
- You don’t have a large family or you don’t feel like you need a lot of square footage at this point in time.
- Your future is an open book. You’re open to the idea of taking on a new job or starting a new relationship at some point down the road.
- You want to be in an area that has the potential to bring in high rental values, particularly somewhere walk-able, close to downtown, or near public transportation.
- You’re open to the idea of taking on a few projects or making some compromises when shopping for a home, especially if it means snagging a lower sale price.
- You either want to build equity so that you can leverage it in the future to buy a bigger home or you’re open to looking for a property that can one day become part of your investment portfolio.
Signs a forever home might be right for you
- You’re financially stable enough to take on higher housing and tax payment.
- You have enough money saved up to handle higher closing costs and a larger down payment.
- You’ve either already purchased your starter home or you’re not interested in the idea of owning a home that you’re only planning on staying in for a few years.
- You have a firm idea of what you’re looking for in a home and you’re willing to pay more for a home that meets all of your needs.
- You’re planning on growing your family in the near future or you’re simply looking for more space overall.
- You’re relatively settled in life and, once you buy a home, you plan on staying where you are for the foreseeable future.
- You’re more inclined to buy in a neighborhood that may be quieter and a little further away from the action.
The bottom line
Making the choice between buying a starter home and a forever home is never easy. However, in the end, it comes down to taking stock of where you are currently in life and where you plan to be in the future. Once you do that, it should become clearer which type of home may be the better fit.
With that said, keep in mind that buying a house isn’t an irreversible decision. If you buy a starter home and realize it’s too small to fit your needs, you can always sell it and buy something bigger. You can do the same if you buy a forever home and find out that it’s too big of a financial commitment. It’s only a matter of time before you find the right house for you.