Ranch, two-story, or condo? City or suburbs? Carpet, hardwood, or tile? However, the biggest question you might face as a first-time homebuyer is: "Starter or Forever Home?" While each person's vision of what a starter home or forever home looks like, here is a basic definition of each:
- A starter home is a smaller, more economical house or condo that meets your basic requirements until you outgrow it — typically, about three to five years — with or without improvements.
- A forever home is a space you can see yourself living in for the rest of your life — twenty years or more. It's what many people call their dream homes... a beautiful kitchen, huge master bedroom with an en suite bath, walk-in closets, and lots of room for growth.
There are three factors to think about before making your decision: budget, local housing inventory, and long-term goals.
Here are some questions to ask yourself before you make your final decision:
- How much house can I afford?
Many first-time homebuyers quickly realize they do not have the budget to buy a forever home immediately. In this case, it's often better to pick a home you can afford now.
To determine how much home you can afford, take into consideration your estimated mortgage payment, mortgage insurance, homeowners' insurance, taxes, utilities, and homeowners' association fees (if any). Don't forget to add on one to four percent per year for home repair expenses.
- Are there homes available in my local real estate market?
A real estate agent can help you determine the number and types of homes currently available in your local real estate area. When you buy a property, it should be one that will most likely appreciate in the future, so you have equity when you decide to sell.
- Where am I in life?
Depending upon what your current stage in life might be will help you determine what type of home you may be looking for. Many middle-aged couples are downsizing and are in the market for a smaller home, and a millennial couple could be searching for a long-term home to raise a fam y. Find the home that feels right for you at whatever age and stage of life you may be in.
If you do the math and determine you can afford your forever home, you might just consider taking that plunge. The real estate market is cyclical, and you may not be able to find your dream home if you don't do it now. When you're buying a home, determine how much you can afford and your plans for the near future.