A Starter Home or a Forever Home? A First-Time Homebuyers Dilemma

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There are a lot of first-time homebuyers trying to break into a real estate market where lately home prices have been skyrocketing. The debate, therefore, is to go big and buy the home you want to stay in or go for something smaller and more affordable with an eye toward selling later? There are pros and cons to both options.

A starter home is a popular choice among first-time homebuyers. The reasons are, of course, its affordability. Buying a smaller home allows the home buyer to build up equity to use as a down payment for a larger “forever” home later. Starter homes are small, with two bedrooms or fewer. They don’t have the latest in appliances or amenities and are usually in older, less desirable neighborhoods.

A forever home is, as the name implies, a property you purchase with the intent to remain there for many years. Forever homes are larger, three bedrooms or more, and are in a neighborhood that the buyer considers suitable for raising a family. They are usually in good repair at the time of purchase and have modern appliances, fixtures, and flooring. Usually the HVAC, plumbing, and electrical are new or updated.

Here’s some guidance from Shine Real Estate to help you make the best decision for your first home purchase.

Understanding Mortgages

An important part of your first home buying experience is to get a firm understanding of how mortgages work. Mortgages are loans with a lengthy repayment schedule that facilitate the purchase of real estate. For home-buyers, and particularly for first-time buyers, there are several different types of mortgages with various qualifications that may be applied for. For the purposes of comparison, the most important characteristics to consider when comparing mortgages are the down payment, the length, the interest rate, and interest rate variability. Begin researching mortgages early in your search to establish a good estimate of your budget.

Some Advantages to Purchasing a Starter Home 

• Property taxes are lower
• Smaller homes require less upkeep
• Buying a starter home means putting less investment into upgrades or refurbishing since the buyer doesn’t plan to live there that long
• It has the possibility of being an investment as a rental property.

Some Disadvantages to Buying a Starter Home

• Older homes will require more upkeep and more frequent repairs
• If the area of town continues to lose value, so will the home

Some Advantages to Buying a Forever Home

• Knowing you’re there to stay allows you to put down roots
• Customizing your home without having to weigh the resale value of those upgrades
• Having a larger home means you won’t be cramped when your family grows
• The peace of mind knowing that you’re not facing a move in the short term

Some Disadvantages to Buying a Forever Home 

• The cost will be higher, including the down payment and closing costs which could make paying for it a struggle
• A larger, more expensive home can mean larger, more expensive repairs and upkeep
• It will take longer to build equity than a starter home

Finding a Home

It’s best when buying a home to work with an experienced real estate agency such as Shine Real Estate. They’ll be able to help you find the right home for your needs and budget, as well as answer your questions that will surely arise during the home buying process.

That doesn’t mean that you can’t do your own research into your potential home options. In fact, it’s a good idea to begin looking through houses in the local real estate market that you’re targeting in order to establish reasonable expectations for what constitutes a good value in the area. Online search tools can help you quickly sort through what’s available to find homes that meet your criteria. Once you’ve had a look through what’s available, you’ll be able to shop with confidence

A Compromise

It may be possible to purchase your forever home at a lower cost if you’re willing to buy the home “as is.” When a home is being sold “as is” the seller will make no repairs nor offer any credits for potential defects of the home or the grounds. These could include structural problems, active termite infestation, or mold and mildew. You should still ask for a home inspection, though, to ensure you know what exactly you’re getting into, as well as contacting a lawyer and looking at land records for any potential red flags.

A Wise Investment 

Whether you’re purchasing a starter or a forever home, it’s smart to purchase a home warranty. Homeowner’s insurance only covers structural damage, theft of belongings, and injury on your property. A home warranty will provide coverage for things like breakdowns in heating and cooling systems, and electrical or plumbing damage, along with covering appliance repairs.

Always hire the most reputable company when it’s time to move. Choosing a “low rate” moving company can cost you more in the long run. Take advantage of online reviews to evaluate your potential mover before signing any contract.

A home is more than an investment, it’s a dream. Weighing all your options before committing to purchase means you’re confident you’re making the right decision for you and that’s always a smart move.

If you're looking for a house in the Sacramento area, trust Best Sacramento Homes for help. Take a look at the communities we represent online. When you're ready, reach out and we will be happy to help you find your perfect property.

Written by Charles Simmons of tosellortostay.com