By Amy Collett
When becoming a homebuyer, one of your first decisions will be whether to purchase a starter home or a forever home. Each path has advantages and disadvantages. The best one for you will ultimately depend on your specific situation and vision. Below, Crane Realty explains starter homes and forever homes in more detail to help you make the right decision!
What Is a Starter Home?
Typically, a starter home refers to any smaller home that a first-time homebuyer purchases. Most of these properties have modest square footage and three or fewer bedrooms. Starter homes generally aren’t in the most glamorous location (although that’s not to say they aren’t available in good neighborhoods). Nor do they have every amenity you eventually want in a home.
Many first-time homebuyers in their 20s and 30s go this route. It can provide you with time to build equity while saving money for a down payment on your next home. It’s best to remain in your starter home for three to five years. However, it can still work to your advantage if you stay for at least two. This will allow you to yield a return on your investment and avoid capital gains taxes.
What Is a Forever Home?
A forever home is precisely what it sounds like: a property you envision living in for the foreseeable future. This type of property will offer all the amenities — or most of them — that you imagine yourself ever wanting.
Many homeowners purchase forever homes with a sprawling backyard, a large and modern kitchen, more bedrooms, and multiple bathrooms. Forever homes are often in a prime location as well. These properties come with a steeper price tag but back it up with a higher resale value.
There’s no official age for buying a forever home. At the end of the day, it depends on your future plans, the area you want to live in, and your budget. Purchasing a forever home can be an excellent investment if you’re ready to settle down and have the means to do it.
Starter Home Pros and Cons
If you’re in the early stages of building your career and family, buying a starter home makes sense. You never know what life will bring, and going this route can buy you time to develop a firm financial footing.
Starter homes come with a lower price point, making homeownership without an overwhelming down payment possible. They also come with lower property taxes and less pressure regarding home maintenance.
Sure, you don’t want to live in a house in disrepair, but a starter home can allow you to learn the ropes of DIY repairs and upgrades. And since the property is smaller, it will likely mean less upkeep and lower utility bills.
With that said, the smaller size of your starter home may not accommodate your growing family. You might want to sell it sooner than you planned before you get a return on your investment. And if your home requires renovations or repairs, you’ll need to factor in the time, energy, and money for those as well.
Forever Home Pros and Cons
Forever homes are usually more comfortable and inspiring than starter homes. They can also be the more financially sound option. If you’re in a stable place in your career and ready to build your family in a specific community or neighborhood, investing in a forever home could be the best bet.
When buying a forever home, you don’t have to concern yourself as much with resale value. After all, you don’t plan on selling it! This means you can make the changes and add the features you want and customize the property to match what you envision. Buying a forever home also provides you the opportunity to become a staple in the community and build lasting relationships — and that goes for everyone in your family.
Another practical advantage of purchasing a forever home is that it will give you more space if you decide to grow your family, work from home, or need bonus rooms for anything else. You can also leave the stress of relocating in mind as your family settles comfortably for the long haul.
Just make sure you’re prepared to pay a higher upfront investment on your forever home. Don’t be surprised if you have to tighten up your budget a bit in the early stages! Also, having a larger home will mean you’re responsible for more upkeep and higher utility bills.
How to Make the Right Move
Once you decide whether to go with a starter or forever home, here are a few things to keep in mind for setting yourself up for a sound investment:
Gauge your needs and budget.
You may have a dream home in mind but focus on what you need now and for the next few years. Then, examine your financial situation, job security, and budget to determine if you’re ready to take the leap to a forever home or if it’s wiser to buy a starter home.
Survey lending options.
When it comes to getting a mortgage, the primary goal is to get a low interest rate with an affordable monthly payment. To achieve this, your credit must be in good standing. The better your score, the better your interest rate. Of course, that’s not to say that so-so credit will keep you from buying a home. There are plenty of options for those who can’t afford a down payment, have lower credit scores and who need more lending flexibility. Regardless of your situation, you can survey your options through lenders like PennyMac loans to get the full scope of what will work for you and your budget.
Consider all the potential costs.
Be sure to factor in all the potential costs in your home purchase. This includes the down payment, mortgage payment, property taxes, utilities, maintenance, and insurance. Understand that insurance only covers the costs of injuries on the property, stolen belongings, and damage to the home’s structure.
You might consider budgeting for a home warranty to cover aging appliances and home systems. Reading home warranty reviews is a good place to start. Look for a policy from a top-rated provider that covers major home systems like your electrical, plumbing, HVAC and your roof.
Evaluate the Home’s Condition
If you choose to purchase a starter home, thoroughly evaluate the condition of the property to get an idea of what repairs and renovations will be involved. Avoid fixer-uppers unless you have the necessary time, energy, and money. The more problems your home has when you buy it, the more work it will take to get it comfortable to live in.
Think About the Location
Finally, consider the home’s location. Will the neighborhood or area suit your current and future needs? How long do you plan on staying in the home? Does the area show signs of value appreciation or depreciation?
Any real estate agent will tell you that location is critical for resale value. If you plan to sell your home within the next five years, try to find a property in a decent location. If this will be your forever home, make sure it will allow your family to flourish.
The Verdict
Choosing whether to purchase a starter home or a forever home might be one of the biggest decisions you’ve made at this point in your life. If you have the financial means and are ready to settle down, you might be ready for a forever home.
On the other hand, a starter home might be the wiser choice if you’re still building your career and aren’t quite ready to start a family. Consider the tips above as you look for the right property. Also, be sure to find an experienced real estate agent who can help you navigate the challenges ahead.
Are you ready to find your starter or forever home? Then look to the expert services of Crane Realty. We can point you toward the best properties that match your needs and budget. Reach out today! 585-536-0755