If you are planning to buy your first home, you may be wondering if you should spend the minimum on a starter home, or aim for something more spacious, luxurious, and long-term. Let’s go over scenarios where buying a starter home is a good idea versus those where it may be a better idea to spend more on a longer-term home.
When Buying a Starter Home Makes Sense
If you are on a tight budget, a starter home may be necessary. Even if you have some wiggle room, it’ll definitely be easier. The down payment will be smaller, and so will the monthly payments. Starter homes also have been known to appreciate fast in a lot of markets, so that can be another benefit. So can the reduced amount of cleaning, maintenance and repair work involved with a smaller dwelling (assuming it doesn’t have any significant issues).
You might also want to buy a starter home if it means you can be located closer to your job or an area that you want to live in where you could not afford a more luxurious home. You’ll need to decide which matters more to you, a larger home or a better location.
When Buying a Longer Term Home May Be Better
A starter home makes the most sense when you’ll be in it for 3-7 years. If you will be in the home for longer than that, you might want a larger home or one you like better, even if that means waiting a little longer to buy. But if you will be in the home for under 3 years, the expenses involved in multiple moves and purchases might not be worth it either. So it’s a question of balance with the timing.
Another concern is repairs. Hopefully, you can afford a starter home that doesn’t have major issues. But if all you can afford right now are houses that are being sold “as is,” or as “ideal for fix-and-flippers,” etc., you should be cautious. Even if you can manage to live in the home yourself without issues, re-selling it in a few years might prove very difficult. You don’t want to find yourself stuck.
One more thing to think about is whether you want to possibly rent out a room in your house. In a lot of cases, that simply is not going to be possible if you have a starter home. If it’s one-bedroom, you just won’t have room for anyone. Though that said, you probably are in a situation where you can’t rent out anyway right now. So, it might still be worth it to get a starter home. At least you can start building equity while you wait until you can afford more space and freedom.
Buy Your First Home with Granite West Funding
At Granite West Funding, we can help you buy your first or next home in Oakhurst or anywhere in California. To get started, please give us a call at (559) 540-2275 to schedule your mortgage consultation.
