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Is buying a Starter Home still the best choice?

For your parents and grandparents, buying a “Starter Home” was a rite of passage. These small, modest homes were purchased soon after reaching adulthood and replaced as families became larger and homeowners wished to move on to bigger and better things.

 

Now, many first time homeowners are reconsidering purchasing a “starter home” and instead waiting for a home that makes sense long-term. Although the choice to buy a starter home is one each family needs to make for themselves, there are a few “pros” and “cons” of buying a starter house.

 

Pro: Start early building stability

Being a homeowner, versus being a renter, has many benefits, one of which is exposure to a different set of circumstances. Homeowners feel connected to the community like they are putting down roots.

 

Cons: Buying more than once means moving more than once

If you’re planning to upgrade in just a few years, does it make sense to buy a small home early on in a marriage just to move again later? For some families, it may be more cost-effective to save and work toward that larger house so you can stay in your “forever home” longer.

 

Although mortgage rates are low right now, the costs associated with buying and selling a home haven’t changed – title insurance, home inspections, real estate agent commissions, and loan fees are all fixed costs of the buying process. Some homeowners would prefer to save that money for. Besides this, many families, especially those with small children, may not wish to uproot and move multiple times during their children’s younger years. Packing up a house can be exhausting, especially if both parents work.

 

Pro: Begin building equity

If you can commit to at least five to seven years in your starter home, there is a good chance that you’ll begin building equity more quickly. Although this isn’t the financial guarantee it was a generation ago, there is still a good chance that you’ll come out financially ahead.

 

When you make value-added improvements, you can take the equity you’ve built and apply it as a down payment on your next, larger home. So basically, the starter home will help leverage your finances to finance your dream home.

 

Con: You may spend more than you anticipated

There are “soft costs” associated with homeownership, over and above purchasing the actual building. Property taxes and mortgage payments are just the beginning. You’ll want to furnish your home, including paint, wallpaper, carpet, and flooring to make it your own.

 

Many homeowners decorate their home with custom window treatments, refinished floors, or new carpet. Some end up making costly mistakes, with a poorly considered contractor, or bad landscaping decisions. You may also need to make a costly repair or replace a furnace. Some families decide that they would be better off having the landlord pay for expensive repairs and waiting to purchase their dream home.

 

Pro: begin accumulating tax benefits earlier

Homeownership allows certain tax breaks. At the end of the year, this can add up to several thousands of dollars reduced from your tax bill. The theory is that the sooner that you own, the sooner you can begin keeping money in your own pocket.

 

Con: You may not be guaranteed home ownership

People nowadays are getting married later and having children later in life. Some people may choose to purchase their first home solo. With higher divorce rates, too, the traditional pattern of starter home, then bigger home, has been disrupted.

 

Homeownership just may not be in the cards for some families. For those who wish to retain their mobility or those whose personal relationships inhibit home ownership, buying multiple homes just might not make financial sense.

 

Buying a home can be daunting, but we’re here to help! If you have questions, feel free to call or text us anytime! 909-921-2544

 

2017-12-28T17:49:15+00:00 By |Categories: Buying a Home|0 Comments

About the Author:

When choosing the Lisa DiNoto Group, clients can count on the “DiNoto Factor” service, built on customer satisfaction, client education, strategic planning, Internet marketing, experienced negotiations, uncompromised integrity and positive results. If you’re looking to buy or sell real estate, call Lisa Dinoto today! 909-921-2544

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