3 Rules for Buying a Starter Home Every First-Timer Should Follow
KEY POINTS
- A starter home can be more affordable than a larger, more updated one, but you'll still need to make sure yours works for your budget.
- Also make certain your home can fit your family comfortably and you're not getting in over your head with repairs.
Mortgage rates are elevated these days, and home prices are still pretty high. Because of this, you may want to consider purchasing a starter home if you're looking to buy in 2023.
A starter home is one that's generally on the smaller side, and it may not be so updated. A good 59% of prospective buyers say they're looking to buy a starter home or fixer-upper this year, according to TD Bank's First-Time Homebuyer Pulse. And that may not be a bad idea if you're looking to keep your mortgage payments to a minimum.
But the last thing you want to do is buy the wrong starter home. To avoid that, aim to follow these rules in the course of your search.
1. Make sure your home can accommodate your family comfortably
It's one thing to forgo the five-bedroom house you're hoping to own eventually because home prices are so high these days. But it's another thing to cram a family of five into a two-bedroom, one bathroom home when you know that's just not going to be a great setup.
Buying a starter home doesn't have to mean being uncomfortable and cramped. So make sure whatever home you buy is large enough to fit your family -- both your current one and your future one. If it's just you and a spouse right now, but you know you have plans to have a couple of kids within the next few years, you'll want to make sure your home can fit them as well.
2. Try not to take on too many big repairs
It's not uncommon for starter homes to need updates. But there's a difference between a few renovations and a host of major repairs.
You may look at a home whose kitchen needs some upgrades and decide that's something you can handle logistically and financially. But think twice before buying a home that needs a plumbing overhaul. Not only might that be very costly, but it might make it so you can't really live in your house while the work is being done.
3. Always run the numbers
You'll generally pay less money for a starter home than a larger one. But that doesn't automatically mean you'll be able to afford a starter home in your target neighborhood.
Before you make an offer on a home, run the numbers to see what you can afford, keeping in mind that your total monthly housing costs should really be kept at or below 30% of your take-home pay to avoid a financial crunch. And that 30% should encompass not just your mortgage, but also, your property taxes, homeowners insurance, and any other predictable, recurring monthly costs.
Buying a starter home can be a wise move when you're a first-time buyer on a budget. That way, you can build up some equity in a property you own and use it to upsize down the line. But do keep these pointers in mind when searching for your starter home so you end up with a property that's affordable and that you actually enjoy living in.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
Related Articles
View All Articles