What to Consider Before Buying a Starter Home

Tired of renting? Whether you’re a young professional looking to take advantage of low interest rates or a young family hoping to put down some roots, you might be thinking about buying a starter home. Not only is a starter home a great option for those on a limited budget, but it’s also a good way to begin building equity – as opposed to throwing away money on rent. It’s also a smart way to ease into the homebuying process, if you’re not quite ready to purchase that forever house. Not sure what to consider when buying a starter home? Here’s the 411 on what you should know before purchasing a starter home.

What is a starter home?

A starter home is usually the first home that a buyer can reasonably afford to buy. While it may not have all the bells and whistles that a “forever home” would likely have, it meets the immediate needs of the buyer. Starter homes tend to be smaller and cheaper than a forever house. For instance, no one would consider a 6-bedroom, 4,000 square foot home to be a starter home. Starter homes are a good option for young professionals, newlyweds, young families and anyone who is hoping to live in one place for up to five years.

What are the upsides of buying a starter home?

There are several advantages to buying a starter home over a forever home. First, for anyone who is tired of wasting money on rent, buying a starter home gives them a solid place to build equity and savings for the future. If the market appreciates over time, then you should be able to make money when it comes time to sell the home. On the other hand, you could also keep the starter home and earn money renting it out. A second benefit to buying a starter home is that it’s simply more affordable than a forever home. Everything from the initial down payment and monthly mortgage payments to the utility bills and property taxes will cost less than if you were purchasing an expensive forever home. The third benefit to buying a starter home is that you likely won’t be stuck long-term, if and when you need to leave. Starter homes tend to sell quickly. Not only that, but you also won’t feel “underwater” (so to speak) while living there because you can actually afford to own it.

What are the downsides to buying a starter home?

While purchasing a starter home is a great idea for many, there are still a number of downsides to consider. First, purchasing a home (even a starter home) is an expensive and time-consuming process. You may have to pay for closing costs and Realtor fees – not to mention, moving expenses. In many cases, it’s simply easier to just to rent. This is especially true in pricey housing markets (think: San Francisco, Boston or Washington, DC) where inventory is limited, and starter homes are very expensive. While equity is certainly nice, renting in pricey housing markets is oftentimes still cheaper than purchasing a starter home. A second downside to buying a starter home is that they are just that: starter homes. Given that starter homes tend to be smaller, the buyer may end up outgrowing the home faster than they expect. In many cases, it might make more sense to simply continue renting until you are ready to purchase the forever house.

The most important factors to consider before buying a starter home

Now that you know the benefits and downsides to buying a starter home, let’s look at other important factors to consider.

Space

Budget

Goals

Location

The housing market

Ready to move to your starter home?

Moving.com has you covered. Our easy-to-use Move Planner includes printable moving checklists for every type of relocation. In addition, you can create a customized moving checklist to organize all of your different tasks by week for a successful move. To find a reliable moving company, you can also check Moving.com’s extensive network of movers. Our website makes it easy to find and book the best moving company for the job. All relocation companies in our network are licensed and insured, so you can rest assured that your move will be in good hands. Best of luck and happy moving!