It didn’t take long for the housing market to recover from the initial COVID-19 surge. According to the U.S. Census Bureau and Department of Housing and Urban Development, new home sales are up for the third straight month. The combination of record-low mortgage rates and pent-up demand for more space has Americans buying homes like never before.
As a first-time buyer, you may be wondering whether to play it safe with a starter home or see if you can land your forever home. Here’s what to know before making such an important decision.
What is a starter home?
Just like it sounds, a starter home is where you’ll begin your homeownership journey. This type of residence could be a condo, townhouse, or possibly a small single-family home depending on your location. Buyers should be aware that starter homes usually lack certain amenities and tend to require extensive upkeep.
So what’s the value of starting with a modest home? For one thing, you’ll have the flexibility to save money and build your own equity simultaneously. This means you could be searching for your forever home sooner than later.
What to look for
Don’t simply place an offer on the first starter home you spot. Here are three factors to look for, as referenced from Millionacres:
- Amount of necessary improvements – You must ask yourself ahead of time how much you’re willing to spend on home repairs and improvements. Sure, it’s probably a good idea to replace old carpeting and paint several rooms. But do you really want to drop thousands of dollars on a leaking roof?
- Location, location, location – You hear all the time from real estate professionals that location is paramount. That especially holds true when it comes to your starter home. While you might have a reliable vehicle, you’ll tire quickly of an hour-long work commute.
- The market itself – Rising home prices enable first-time buyers to build equity faster. That said, you won’t find a favorable real estate market everywhere. Do some research and get an idea of where property values are on an upward trend.
Starter home price
As recently as 2018, the average price of homes purchased by first-time buyers was $219,000. Yet the figure is significantly higher in Colorado. MSN put the state’s median starter home value at $247,000.
We get it — that’s an intimidating price point for a number of aspiring homeowners. Thankfully, there are down payment assistance programs available that can help you purchase a home, for less. Reach out to a trusted mortgage lender and determine which options are worth exploring.
What is a forever home?
It’s the home you’ll reside in for the majority of your adult life. Think of this as the place where you raise a family, become part of a community, and maybe even retire. Though forever homes are often more expensive than starter homes, it’s yours for good once you pay off the mortgage.
But how do you know when it’s the right time to pursue your forever home? Frankly, the answer hinges on your specific goals. That’s why it’s important to work with an agent who has your best interests in mind.
Should you skip a starter home?
Perhaps you would rather bypass the entry-level home altogether. You aren’t alone in your thinking, as Millennials are choosing larger, more expensive homes over starter homes and fixer-uppers. These buyers prefer to hold off on becoming homeowners in order to save for the residence of their dreams.
On the surface, skipping a starter home seems like a no-brainer. You obviously have more of an opportunity to save for a down payment and pay off existing debt. The flipside, though, is that you never know what the housing market will hold 5-10 years from now.
Our advice? Consider forgoing the starter home if you’re constantly moving for work. Otherwise, you may benefit from temporarily being in this type of home.
We could go on and on about the differences between a starter home and forever home. The reality is that purchasing your own place allows you to invest in yourself. And with experts predicting a low-rate environment through at least 2021, homeownership will remain incredibly affordable for first-time buyers.
Ready to get started with the home buying process? The team at American Home Agents treats every customer like family. Not to mention, our award-winning agents have decades of combined experience serving those in Denver.
Give us a call at (303) 695-5900 or check out our featured properties online.