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Should you buy a starter or skip to the forever home?

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Should your first time buying a home be your only time? Buying your first home as a forever home can help spare you money, stress and time — but there are differences between moving into a starter home and planting permanent roots in your forever home. Here’s what to consider. 

Starter home vs. forever home

Appropriately named, a starter home represents your “start” into the world of homeownership. These tend to be smaller and more moderately priced properties, and the primary goal is to stop paying rent so you can start building equity. Eventually, you might want more space due to the desire for more amenities or a growing family. For now, though, a starter home can meet your needs. 

A starter home isn’t necessarily a single-family property, either — a lot of buyers on smaller budgets might look at condos or townhomes for their starter homes. 

A forever home falls on the other end of the homeownership spectrum. When you buy or build a forever home, you’re doing so with the intention of sticking around in it for a long time. It doesn’t have to actually be forever, but this kind of property includes the space you need for the foreseeable future. 

Pros and cons of a starter home

Pros

  • You could pay a smaller price tag. Starter homes tend to be smaller, and with less space comes less sticker shock. If you plan to stretch every dollar you have for a down payment, a starter home will be more appealing. A smaller price tag means you won’t have to wait as long to save up that down payment. 
  • You can save in other areas, too. If your property is worth less, you will have a smaller property tax bill each year. A smaller space might come with a more affordable homeowners insurance bill, too.
  • You’ll get an introduction to being a homeowner. You won’t be able to call a landlord for all of your maintenance needs. Consider a starter home as the trial period to help you understand what you’ll be looking for — and what you’ll be looking to avoid — when you move into a more permanent place. 

Cons

  • You might need to pay more for repairs and maintenance. The adage “you get what you pay for” can, unfortunately, ring true with a starter home. “The inventory at the bottom price-point of the market in our area requires fixes, repairs, and upgrades,” explains Josh Lagasse, broker/owner, RE/MAX Realty One in Wells, Maine. So if you’re buying a starter home, you could easily wind up with a long list of additional items to pay for after you move in.
  • You could outgrow it sooner than you think. Let’s say you weren’t planning on having children anytime soon, but that’s since changed. Before you know it, that living space that felt perfect for two now feels like the walls are closing in. 
  • You’ll need to go through the process of buying again. That starter home will eventually serve its purpose for you, and when it does, you’ll have to deal with listing it, hosting open houses, and finding the right buyer. Then, you’re back in the same position of looking for another home — and paying thousands in closing costs. 

Pros and cons of a forever home

Pros

  • Those closing costs will stretch out over a longer period of time. The expenses of buying a home can add up to thousands of dollars. If you stay in your home for a long period — 10 years or more — you’ll give yourself a wider window to make that big investment worth it.
  • You won’t have to deal with the hassle of moving again anytime soon. Moving is not fun, nor is it cheap. In fact, the average cost for a short-distance move (less than 100 miles) is more than $1,600, according to HomeAdvisor. With a forever home, you won’t have to worry about packing up or taping boxes in the near future.
  • You’ll feel more comfortable investing in the property. When you know you’re going to use the home, you can decide about upgrades, additions, and remodeling projects with your opinion at the steering wheel. Rather than worrying about what the next buyer might think about it, you can tailor the home exactly to your needs.

Cons

  • It could cost more to buy. Since forever homes tend to be bigger, you’re likely going to spend more money to get one. That can mean needing to save more for a bigger down payment or applying for a jumbo loan, with stricter credit requirements. 
  • It’s going to cost more when you move in. If you have a bigger space, you will pay more to heat it and cool it. If you have a bigger yard, you’re going to pay more for its upkeep. Simply put: More space means more money. 
  • You could feel stuck. Do you like the neighborhood? Do you like the schools? What’s your commute like to work? If you buy a forever home only to realize that the community and the location aren’t right for you, you’ll wind up with a great space but a bad feeling about where you’re calling home. 

Should you skip the starter home?

If you’re thinking about skipping the starter home step and heading straight to a house that you don’t think you’ll want to leave for a long time, you’re not alone.

“Many of my first-time homebuyers, if fortunate enough financially, are skipping the first-time home altogether and moving right up to the second home,” Lagasse says. “With rising prices, it just makes more sense to buy the more long-term home solution when interest rates are this low as they have more purchasing power and can get into the bigger home.”

Lagasse also points out that “spending a little more per month puts them in a more ready-to-go quality of home with a fixed monthly mortgage hopefully with less to worry about in unexpected near-future repair costs [that often come with starter homes].”

Another reason? Buyers are just tired.

“Many buyers have just been beaten up with the process of buying over the past couple years,” Lagasse says. “They’ve won their home and really don’t want to go through it all over again anytime soon. This is their prize, and by purchasing more of a forever home, they can now focus on the next chapters of their lives, which for many in the millennial demographic has been put on hold due to economic uncertainty and events over the past few years.”

All those reasons might sound appealing, but it’s important to ask yourself some key questions before thinking about skipping the starter home:

How much can you afford?

Be realistic about your budget and how much you can afford each month with a mortgage. If skipping the starter home means you can only afford to make a 5 percent down payment, you’ll be borrowing more money and paying mortgage insurance premiums until you hit the 20 percent equity mark (assuming you’re taking out a conventional loan).  

What else will you need to do to the house?

A forever home doesn’t automatically mean a move-in-ready dream home. Some issues might require work sooner than later. Be sure to think about what improvements and projects you’ll need to be able to cover, too.

What does forever look like for you?

There’s no crystal ball, but you need to think about what the future has in store for you and your family. Are you done having children? If not, does the home have enough bedrooms to accommodate a growing family? Are you planning to get a dog? If so, you might need to think about a bigger backyard. It’s not just about the property, either: Think about your career trajectory to determine if a relocation might be in the cards, as well. 

What’s the outlook for the local real estate market?

Let’s say that the “forever” period comes to a close a decade from now. With that in mind, think about the forecast for real estate valuations in the area. Will it be an attractive place to move in 10 years? Could you rent out your property at the time and use it as a passive income source? Then, as you weigh a starter pad versus a place that feels more permanent, think ahead to what you can do with the property if and when you’re ready to find another place to call home.

Written by
David McMillin
Contributing writer
David McMillin is a contributing writer for Bankrate and covers topics like credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.
Edited by
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