Family in their new home

Starter Home or Forever Home

Updated December 5, 2019 . AmFam Team

Choosing between a starter home and forever home is a big decision, especially for first-time buyers. Use these pros and cons to make the decision for you.

When you make the decision to buy a home, you’re faced with a ton of choices. How many bedrooms? Is the yard fenced-in? What’s the neighborhood like? One question a lot of people have is whether they should buy a starter home for their first house or find their forever home. We’ve put together a guide to walk you through what starter homes and forever homes are, along with the pros and cons of each option.

What You Should Consider Before House Shopping

If you’re ready to go on the great adventure that is buying your first home, there are a few things you need to consider before starting. It’s best to get all your ducks in a row before you become a homeowner. Ask yourself these questions before you hit the housing market:

  • How does your financial state look? Do you have a low credit score or debt?
  • What is the state of the housing market? Are mortgage rates rising or falling?
  • Where do you want to live?
  • How much do you have saved up?
  • What are your non-negotiables in a home?
  • Do you have personal financial risks? Children? Job change?

Answering these questions will help you better understand your resources before you start the home buying process.

Starter Homes

A starter home is a great option for your first home and can be a great place to lay a foundation for your life, whether you’re newly married or just tired of renting. We break down the best — and worst — things about starter homes so you can make an informed decision before handing over a down payment.

What is a starter home?

Your idea of a starter home will differ vastly from someone else’s, depending on your location, financial state and personal wants. And a starter home doesn’t always mean settling for the bare minimum. For example, you could find a home in your ideal location but it might be smaller than you’d like. Think of it like a stepping stone to reaching your dream home.

What are the benefits of purchasing a starter home?

Purchasing a starter home vs. a forever home usually means saving money, but it can also be the right choice for a few other reasons. Here are just a few:

  • A starter home is usually more affordable than your forever or dream home.
  • With a starter home, you can build equity in your mortgage and sell the house at a higher value.
  • No more renting! You’ll own your home and be able to make important decisions regarding it.
  • The housing market is usually more transparent and predictable than rental rates.

These pros can be a big help in making a decision between a starter home vs. a forever home.

What are the cons of purchasing a starter home?

While purchasing a starter home might be a good idea for some folks, it’s important to realize there are a few downsides, too. Check out these cons to buying a starter home:

  • Renovating a starter home can be an expensive task, even if the home itself is cheap.
  • Starter homes can be hard to sell in the future, depending on upgrades and the housing market.
  • It’s not your dream home, so it won’t have all — or maybe even any — of the things you want.

Weigh these cons against the pros before you decide to buy a starter home.

Forever Homes

Your forever home might be a two-story colonial in a cozy Chicago suburb or a log cabin in rural Colorado, but no matter what, it’s your dream home. Here are a few important things you should know about forever homes before embarking on the journey to find yours.

What is a forever home?

When you think of a forever home, you imagine your dream house. This is somewhere you want to put down permanent roots, somewhere you can imagine yourself living for the rest of your life. We’ve got a few things for you to consider when deciding to purchase a forever home — both the good and the bad.

What are the benefits of saving up for my forever home?

Saving up for your forever home isn’t usually something that happens overnight. It’ll take time, effort and discipline, but your dream home is worth it. Your forever home will have all the qualities and features you desire in a home, and because you’re not planning to move out of it any time soon, you don’t have to worry about its salability. Also, any home improvements you make will be because you want to and are excited about them, rather than to improve the value of the home.

What are the cons of purchasing a forever home?

Purchasing a forever home as your first home can seem like a dream come true, but there are a few downsides to this path. One big one is the cost. Typically, a forever home is more expensive than a starter home. This can be due to many factors, including size, architectural style and desirable features like new hard wood floors or smart kitchen appliances. Another con is the potential for the housing market to be volatile in the future, if you ever do decide to sell it.

Starter Home vs. Forever Home: A Breakdown Comparison

Here’s a quick comparison of the pros and cons of a starter home vs. a forever home:

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How to Decide Between a Starter vs. Forever Home

Deciding between these two options can seem complicated, so let’s break it down into a couple of steps.

Evaluate your finances

Make sure you’re financially ready to make a down payment on a home —as well as cover all the closing costs. This means assessing your income and expenses, as well as any upcoming life changes like marriage, childbirth or divorce. These will all affect your ability to purchase a home, so be sure everything’s in order before you start the home buying process.

Start shopping

Now you can start looking at options. Connect with your bank or a lending agency to see what kind of mortgage you qualify for. Once you understand what you can afford and what your credit will allow, you can get a better picture of which type of house to purchase.

Find the difference

Calculate the estimated difference between a starter and your forever home. If you can manage to save up the difference within a year, you might be ready for your forever home. But if it’ll take longer than that, you may want to shoot for a starter home.

Once you’ve figured all that out, you’re ready to make your decision!
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What’s Next if I Decide to Purchase a Starter Home Now?

If you’ve decided to purchase a starter home, you’ll likely want to read our guide on purchasing your first home. You’ll also want to start considering some major factors like mortgage loan options and gearing up for home insurance. Buying a house for the short-term is still a lot of responsibility, so be sure you’re ready for all the new things that may bring into your life.
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What’s Next if I Decide to Save up for My Forever Home?

If you’ve decided to wait, you’ll likely want to map out your savings plan for the next several years before the big purchase. This may mean a lot of budgeting and cutting back on extra expenses, like eating out or seasonal clothes shopping. But with hard work and dedication to your goal, you’ll have saved up for your forever home in no time!
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Protecting your new home — whether it’s a starter or a dream forever home — is an important part of homeownership. Connect with your American Family Insurance agent (Opens in a new tab) today to talk about your homeowners insurance options and learn about all the different coverages you can get for your new house. Our agents can help you customize a homeowners policy that fits your needs and helps you protect what matters most.

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