It’s so easy to think that the home you’re contemplating purchasing is the one you will live in for the rest of your life. As we all know, however, times change, tastes change and, yes, people change. Families may shrink or grow. Jobs may be relocated. Neighborhoods evolve and may no longer be the dreamscape you bought in to.
So, while keeping an eye toward the future is always a good idea when making a major financial investment, such as purchasing a house, the future, as Doris Day once sang, is not ours to see.
Buying the Starter Home
If you choose to consider your first home a starter home, you’ll find the process less emotionally draining and far less financially stressful. Since you know that you’ll be moving on in a few years, you won’t be looking for the bells and whistles you might be if you were searching for your dream forever home.
If you qualify, an FHA-backed loan may be the ideal choice, with its low down payment and easy qualifying. If you think you’d consider a fixer home, FHA offers an amazing loan program called the 203k. With this product, the loan for the home and the rehab work are rolled into one, so there is only one payment. The program requires that the work be complete before closing on the mortgage portion of the loan, and allows for periodic payments to contractors throughout the rehab process.
Even if you don’t buy a fixer, improvements you make to your starter home during the period you own it will pay back big dividends when you sell it to move into your forever home. Items such as landscaping and updating kitchens and bathrooms will increase the home’s value. Just be cautious not to over-improve the home. The other homes in your neighborhood will hold the value of yours at a certain level - no matter how much you improve it beyond that.
Pros and Cons to Buying a Starter Home
As mentioned earlier, starter homes require less of an initial investment than their larger, fancier counterparts. Plus, owners of starter homes often pay less in utilities, maintenance and property taxes.
However, a starter home may quickly become too small for a growing family. If you've paid for renovations but are looking to move earlier than anticipated, you may not see much of a profit from your hard work. Worst of all, if the real estate market drops, you may be faced with the unpleasant choice of staying in your starter home longer than you wanted or selling it at a loss.
Buying the Forever Home
The forever home is typically the one you plan on spending the rest of your life in – at least as long as you can still get around. It may be the home in which you plan on raising your family, or it may be that home in which you’ve long been dreaming of spending your retirement years.
Buying the forever home requires more diligence when house hunting. After all, you don’t plan on moving again, so everything should be either exactly what you want or the home must have the right “bones” to allow for renovation so it suits your dream.
Since you won’t be selling a home to purchase the forever home, you’ll save money on closing costs and moving expenses. You’ll also be spared the aggravation and stress of trying to find a buyer quick enough to close on both escrows simultaneously.
Because you’ll be spending far more time shopping for and inspecting the home, it probably won’t require much work after moving in.
Whether you decide that your first home purchase will be your last or consider it merely a stepping stone on your way to something far finer, having a plan and sticking to it will make the process run smoothly.