Potential first-time homebuyers are often faced with three crucial decisions: starter home, long-term home, or continue renting. The starter home is a modest, one- to two-bedroom house typically with more affordable financing that can help jumpstart first-time homeownership. Both have their up and downsides, and ultimately, the decision is up to the buyer and their present and potential future outlooks. However, homeownership comes with plentiful short and long term costs that must be accounted for. With the housing market on its way towards recovery, millennials are starting to purchase their first-time homes, often within the affordable end of the housing market, and so more of these homes are being built. Therefore, whether you are a younger or older person looking to stop renting and enter ownership, weighing your options is crucial.
To answer the question, “Should I buy a starter home?” you must first consider your present circumstances and your future goals.
Homeownership comes down to a few costs: down payment, mortgage payment, property tax, insurance, maintenance, potential add-ons, cable and internet, pest control, and emergencies—to name a few. The first three or four are obvious, but we don’t often consider the rest. If you can afford the down payment and mortgage, don’t forget to consider those soft costs like maintenance, pest control, emergencies. For a starter home, these costs may be softened by the affordability typically found in those types of homes, and will likely be ideal for first-time homebuyers at a comparatively disadvantaged economic state but stable enough for ownership.
In other cases, these extra costs may lead you to paying more than you expected. Purchasing a starter home and adding valuable improvements might build equity sooner while remaining affordable, but may also amount to the same as renting, especially if you don’t plan on staying in that home longer than five to eight years. On the plus side, you gain worthwhile experience as a homeowner. No amount of research and heeding advice can prevent mistakes, and if you start your homeownership modestly with an affordable starter home, you may save money, time, and heartache when you move on to your newer, better, dream home.
The downside to moving to your newer, better, dream home is just that: moving. Packing up and moving is exhausting emotionally and physically, and extra costs are often involved.
Furthermore, few things in this world stay the same, and homeownership is no exception. Our lives are constantly on the move, and some may be hesitant committing to long-term (or short-term) ownership unless we are confident in our stability. For young adults just getting started, renting may be a better option because a new and better opportunity elsewhere may require packing up, moving, and becoming an unexpected landlord or selling the home at a loss.
A starter home may be good for those who want ownership, can deal with the extra costs, do not mind moving when it’s time to move, and feel relatively stable in their current job or city. Alternatively, purchasing a long-term home may be ideal for those planning to start a family sooner than later and need a space larger than a one- to two-bedroom house; who don’t want to move again; or who don’t want to deal with the costs involved in starting small. For these people, continuing to rent and save for that long-term home may be ideal. Ultimately, the decision is down to you: do research, think, and don’t jump on the first available opportunity unless you know it is right for you and those involved!
For more tips and advice for current and future homeowners, continue following the Ryan Roberts Realtor blog! And for your real estate needs in Auburn, Opelika and Lake Martin, contact Ryan Roberts at 334-750-9872, or email [email protected]!
