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Some first-time homebuyers seek out their dream home from the start -- the house they'll raise kids in and grow old in together. But for other buyers, a starter home is the best way to learn the ropes of homeownership.
As the name implies, a starter home is one you generally don't intend to live in forever, or even for a number of years. Rather, it's a home you might occupy for five years or less before moving on to a larger home, or one that's more ideal for you.
1. A limited number of pressing repairs or improvements
The reason people buy starter homes often boils down to price -- they can't afford a larger or more updated home, and so they buy a place that's in their price range with the hopes of selling it at a good price a few years down the road.
But if your goal in buying a starter home is to have someplace to live for a few years while saving money for a better place, then the last thing you want is to sink thousands of dollars into your property for the limited period you're living in it. If you do end up putting a ton of money into your starter home, you may find yourself stuck in that home longer than you'd like to be.
Before buying a starter home, pay close attention to issues with that property that could set the stage for costly repairs, like an aging or failing roof, a not-so-reliable heating system, or a mold issue that desperately needs to be addressed. It's one thing to make a few minor repairs or cosmetic changes to your starter home, but you don't want to sink in major money to make that space livable.
2. A convenient location
The purpose of a starter home is to avoid paying rent and actually build equity in a property while you work toward establishing a better financial position so you can buy a home you'll live in long-term. As such, you might as well choose a home that's conveniently located near the people and places you tend to frequent right now -- such as your job, your family, and the restaurants you enjoy dining at. That will help you make the most of your time while you're living there.
3. A stable or thriving housing market
A starter home, by nature, is one you're unlikely to stay in for very long. As such, it's important to buy a starter home in a neighborhood where home prices have either held steady in recent years or have been slowly but surely increasing. That way, your chances of being able to sell the property and command top dollar when you want to will be fairly high.
Remember, too, that when you get a mortgage, there are closing costs involved. These typically equal 2% to 5% of your home loan's value, which is not a small amount. The longer you stay in a home, the more likely you are to recoup your closing costs. But when you're talking about a starter home that you might sell within a few years, choosing the right market is especially important.
Buying a starter home can be a smart move, provided you choose the right property. Keeping these points in mind as you go about your search should help you land on the right decision.
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