By Julie DeLong, A-1 Freeman Moving Group
Purchasing a home is an exciting journey, but you may not be ready to purchase your dream home just yet. A starter home is a great option for those who want to get out of the "rent trap" but do not want to commit to purchasing a large home with the responsibilities and chores that go along with it.
Trying to decide if a starter home is the right move for you? Read on to learn about the pros and cons.
Let us examine some Pros of purchasing a starter home:
1. You are Building Equity Toward Homeownership
Paying your mortgage each month is a cause for celebration as each payment puts you one step closer to being a full-fledged homeowner! As you pay your mortgage payments each month the balance of your home loan gradually decreases and you gain valuable equity, plus or minus any housing market fluctuations.
2. Your Mortgage Payment Will Likely Be About the Same as Your Rent
Start small when buying your first home and enjoy a mortgage payment that will likely be about the same or less than your rent. Purchasing a home is a smart investment because you earn money through appreciation while living in the home as opposed to losing money each month when renting a home. Starter homes typically come with smaller price tags.
3. Your home will likely increase in value over time
Unlike with vehicles and most other big-ticket purchases, a home almost always increases in value over time. If you are struggling to come up with a down payment for your dream home or would like to have more money in your savings account before committing to the home you plan to live in long-term, purchasing a starter home might be the ideal solution for you. Live in your starter home until such time as you have earned enough equity to make a healthy down payment on a larger home.
Now that you understand the pros of purchasing a starter home, let us examine the cons:
1. You Will Likely Need to Make a Down Payment & Pay Closing Costs
Depending on your credit history and the lending criteria used by your mortgage broker, you should expect to pay as much as 20% down on the home you purchase as opposed to paying a small deposit when you rent a home. Home buyers typically are also responsible for paying the closing costs. In some instances, you can negotiate with the sellers to pay part of the closing costs, but you should come to the table prepared to pay at least 50% of these fees.
2. If Something Breaks, You Have to Fix It!
When you stop renting, you give up the right to the on-call maintenance team who magically fixes everything that breaks down. Before committing to purchasing a starter home, make sure you have enough money in your emergency savings to pay for appliances that break down and repairs that you may need to contract out. You can save a lot of money if you or someone you know is handy and can do a lot of the repair work without having to call in a professional.
3. You May Outgrow the Home Quickly
Starter homes are great for young couples who are just beginning to start a family, but you could end up outgrowing your home quickly with the addition of kids and pets. Be thoughtful when choosing your starter home and ensure that it will be big enough to suit your family goals for at least the first few years. Determine if the home has enough bedroom and outdoor living space so that everyone can coexist comfortably.
Purchasing a starter home is an exciting adventure that will save you money and earn you equity that can be used to expand your personal empire in the future! No matter where you decide to move, make sure and budget for moving costs, such as professional movers, packing supplies, travel expenses, etc. At A-1 Freeman Moving Group, we are a professional moving company who will help get your belongings to your new home safely so you can sit back, relax, and enjoy being a new homeowner!
Request a free quote