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Starter Home Vs. Forever Home? 5 Questions to Guide Your Decision

House hunting is both exciting and nerve-wracking. After all, buying a home is likely the biggest investment you’ll ever make, so you want to feel confident in your decision. Before you begin your search, consider whether you’re looking for a starter home or a forever home.

There are several notable distinctions between starter homes and forever homes, including size, cost, features, and equity potential. Starter homes tend to be smaller and cheaper with fewer bells and whistles, but plenty of opportunities to build equity. Forever homes, while more expensive, have the space and amenities to accommodate changing needs. What you choose will depend on your budget, lifestyle, needs, and preferences. Explore five key questions to determine what makes the most sense for you.

  1. How Long Do You Anticipate Staying in Your Home?

As the name suggests, a starter home is where buyers can plan to spend three to five years until they’ve outgrown the space and are ready to move on. Young professionals with open possibilities for the future may opt for a starter as a way to build equity while figuring out their next steps.

A forever home is not necessarily the last place you’ll ever own, but one where you can picture yourself living for a long time. If you have a stable career, a clear trajectory for your future and a desire to put down roots, a forever home may be the way to go.

  1. How Much Can You Reasonably Afford?

Getting mortgage preapproval at the beginning of the home-buying process gives you an idea of how much money you can borrow. It also identifies a price range within your means. Keep in mind, though, that the cost of homeownership extends far beyond the price of the house. Include all home-related expenses when calculating what you can afford:

  • Moving expenses
  • Closing costs
  • Private mortgage insurance, if applicable
  • Furniture and home decor
  • Utilities
  • General maintenance
  • Landscaping
  • Minor and major repairs
  • Upgrades
  • Commuting costs

Most starter homes are 1,400 square feet or less, meaning overall expenses would be much lower than a forever home.

  1. What Are Your Non-Negotiables?

List your desired features. Avoid discounting properties that don’t check all the boxes as you can always make modifications. However, make sure you’re comfortable with your location. If you have kids or are planning to relatively soon, a house in a sought-after neighborhood in a good school district may be a top priority, directing your search toward forever homes.

  1. What Are the Current Market Conditions Like?

Purchasing a starter home in a seller’s market may not be the most financially sound choice. You risk losing money if you pay top dollar and then sell a few years later after the market has cooled off.

Track interest rates to decide if it’s a good time to buy. Financial experts say even a 1% increase can cost you thousands of additional dollars over the life of your mortgage.

  1. How Much Work Are You Willing To Put In?

Opting for a fixer-upper may put you on the hook for costly repairs such as mold remediation or foundation issues. On the flip side, you can customize the home to your exact preferences and significantly increase its value. Before you commit, schedule a home inspection. Price out repairs and renovation costs, adding 20 percent to your estimate as a buffer.

Starter homes and forever homes each have pros and cons. The right home for you is one that best aligns with your lifestyle, financial situation, and goals.

Image via Pexels

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