Starter Home vs. Forever Home: Which Is Right for You?
If you’re considering buying your first home, you probably have a lot of questions to think about. One of your biggest decisions might be whether to buy a starter home now, or save up for a home you plan to live in for a long time. We’ve highlighted some things for you to consider to make your choice more informed and stress-free!
What’s the Difference Between a Starter Home and ‘Forever’ Home?
Before considering your options, it’s important to know the difference between starter homes and ‘forever’ homes:
Starter home. They call it a starter home for a reason. It’s a good place to start! This is a home you’ll live in for a short amount of time, usually no more than five years, knowing you’ll outgrow it and sell. Typically, a starter home is a small home or condo that you can afford now, because it has a lower home price value and the down payment is generally more affordable.
Forever home. This is a home you plan to be in for the long haul, or at least 20 years or more. You’re not looking to sell your forever home anytime soon, so you’re more willing to put in the money to renovate and make it uniquely yours.
How do I Know Which is Right for Me?
Before making the big decision to buy, you might want to ask yourself the following questions:
Where am I at in life? Everyone’s house hunting search is unique, so understanding what stage you’re at in life will help keep your focus clear. Take a good look at your lifestyle, job, family situation and budget to really understand if now is the time for you to buy a home. What stage of life you’re at isn’t necessarily driven by age anymore, so do what feels right for your particular situation.
How are my finances? Do you have money saved up, good credit and a steady income? Determine what you realistically can afford for a down payment, because this will considerably influence your home search. Also, it’s important to look beyond the mortgage payment. Many people figure they can afford to make a payment equal to or a little more than their rent, but don’t forget to add up all the additional costs of the property, like homeowners insurance, taxes, utilities and maintenance.
In some cases, it makes more financial sense to continue renting and save up for a down payment for a forever home, and other cases you may find yourself reaping the benefits of purchasing a starter home and building up equity. Or, consider going the starter route and make DIY improvements!
Do I want to make a profit on the home? It’s important to look at the investment opportunity when deciding between a starter and a forever home. If you want to make a profit on your home, a starter home will give you more bang for your buck, because it won’t take as long to appreciate in value. Keep in mind, a good payoff timeline is about five years, which is about the time you’d want to move out of your starter home anyway.
What do I want from my home? If you’re searching for a home for the first time, you might have a list of “must haves” that you present to your realtor. But realistically do you really know what you want yet? Buying a starter home could help you realize what you do like and don’t like in a home, so when it comes time to find your long-term home, you know what works best for you and your family. Maybe right now a home theater is on the top of your list, but you quickly realize location, school district and bigger yard are all more important. A starter home is a great way to separate your needs from your wants.
Like any big decision, home ownership has a learning curve, but American Family is here to help and has your best interests in mind. Once you’ve taken big steps toward finding a place that’s right for you, no matter what stage of life you’re in, talk to your agent about homeowners insurance coverage to make sure you’re protecting what matters most. Happy house hunting!
Related Topics: Owning A Home