Should I Buy a Starter Home?

Every first-time buyer is probably wondering whether it makes sense to go with a smaller, one or two-bedroom starter home or buy a "forever home" that they can grow into over the next 30 years. Are we pro-starter home or pro-forever home? We thought it would be fun to give you both perspectives!

Point: Why you should buy a starter home

A starter home is a great, low-risk way to get into the real estate market. Here's why. 

It's easier on your finances

Saving for a down payment was hard, but now it's time to start thinking about what your monthly payments will be on your new home and what you can afford when you add in utilities, home maintenance, and all your other expenses.

If interest rates are high, it might make more sense to buy a smaller home so you can build equity and save for a bigger investment. Even if you're pretty sure your career will advance in a few years and you'll have more money each month, there are no guarantees. The last thing you need is to be paying a mortgage on a home you can't afford. 

It gives you time to think about the future

When you’re young, there’s still a lot of room for change in your life. You might need to relocate for a great new job, you might not know how much space you’ll need for your future kids, and you’re still learning what’s important to you in life. A starter home gives you some time to figure out those unknowns. Once you’re settled in a job, have a better idea how many kids you want, and what kind of neighborhood you want to live in, you can find a “forever home” that meets your needs.

It's a learning experience

There’s a lot to learn when it comes to owning a home. There’s the upkeep, decorating, and repairs.  A starter home is a chance to make some mistakes before your “forever home”. You might realize you hate the style of house you bought. Or that, even though you love the energy in the city, you really just want a quiet, relaxing neighborhood to live in.

It's great in a tough market

Home prices can be extremely different in different parts of the country. In a competitive market, like San Francisco, even a small, one-bedroom home can be out of reach for a lot of first-time buyers. But if you're looking in a more affordable market a bigger house might be completely within your budget. If you know you plan on staying in the home and you can afford it, it might make perfect sense to go for something a little larger. 

Counterpoint: Why you should never buy a starter home

There are a lot of arguments in favor of a starter home. But what if your starter home turns into your forever home?

As a first time homeowner, remember that you might be living there for a while. Here are a few reasons to skip the starter home. 

It's not the right fit

Sure, your first home might not have the built-in sauna you've always wanted or an extra bedroom for your guests. But do you like it for what it is? You can probably live with your guests sleeping on a sofa bed, but how do you feel about living in a neighborhood with no sidewalks? It might be okay for a couple of years, but what if you don't get promoted at work like you expect? Or what if your home value goes down and you can't sell?

Don't talk yourself into buying a house you don't love because you don't think you'll be there for long. You never know.

A bigger home is a better deal right now

If interest rates are low, and you know you’ll be in a larger home for close to 20 years, it might make sense to skip the starter home. Since you don’t know what interest rates will do when you’re ready to buy your “forever home”, buying the bigger home now--and locking in your low-interest rate--might make more sense if you can still afford the down payment and the mortgage.

There's no potential for growth

You may think you'll move in a few years, but what if you fall in love with the neighborhood? Or you don't want to leave the school district? Is there room to add another bathroom or bedroom? You might want to stay, and having the option of adding on to your existing home can be important.

When you're buying your first home, the most important thing to remember is that you don't know what comes next. Every house could be your last. Never buy a sub-par piece of property because you aren't planning to stay. After all, you'll still need to sell it at some point. At the very least, you want your home to be attractive to potential buyers and have long-term investment potential.

Buying a starter home is just like buying any home: You need to find the house that's right for your budget, your family, and your life.