Starter homes have taken on a different meaning than what they meant in the past century, or even fifteen years ago. With the transitory nature of this generation’s early adult lives, the traditional concept of a starter home doesn’t seem to fit the zeitgeist. Contrary to popular belief, millennials are actually interested in purchasing homes. There are several reasons why millennials are waiting longer to settle down, but the main culprits are rising costs of living and student debt make it a struggle for them to save money.
However, the need for them has only changed, not diminished. The perspective just needs to be shifted. Starter homes are still a great way to break into the housing market because you can build equity in a less expensive home that you can cash into your forever home later on.
One of the biggest hurdles that keep people from buying a home is the myth that you have to have 20% saved for the down payment. Actually, there are plenty of loan programs that only require 5% down or even none at all, as well as down payment assistance programs to help you cover the costs, created specifically to make buying a home more accessible for everyone.
Here’s a few things to take into consideration if you’re debating buying a starter home:
- Commitment. Your timeline is important. If you know you’re only going to live somewhere for a few years or less, it may be less stressful to continue renting. Five or more years, though, is when having a home can be more beneficial.
- Location. Do you want to live near the city center or the suburbs? Finding a home in a city that’s affordable can be challenging, so if you want to live in town, it might be more feasible to rent.
- Family planning. Singles and couples are more able to make a smaller place work, especially if you don’t plan on growing for the next few years.If you already have a decent income and are planning to start a family in the very near future, it might make more sense for you to continue to save for a larger home.
- Other housing options. Maybe you live in an area that has few rental options and the options that exist are shoddy. In this case, if the mortgage payments and rent payments are relatively similar, it might open up the inventory available to you and get you a nicer place.
- Potential investment. There is an upside to knowing your living situation isn’t permanent – you can live in the house for a few years and, once you’re ready to move, turn that sucker into a rental property. It’s a great investment and permanent source of cash flow.
It’s up to you to determine if a starter home pays off depending on your current circumstances and your plans for the future. For more information and in-depth discussion, reach out to your local Flat Branch family to help you weigh the pros and cons of a starter home.
