How Buying My First Home Helped Me Afford to Buy a Bigger One

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KEY POINTS

  • Homeownership can be expensive.
  • That's especially true if you want to buy a large property.
  • Purchasing a starter home can make it easier for you to upgrade.


Climbing the property ladder is easier once you get your foot on the first rung.

Several years ago, my husband and I built a relatively large home that is big enough to accommodate our growing family as well as extended visits from grandparents. Making this purchase was easy for us for one simple reason -- we'd already bought a home, and our ownership of that first property opened the door to buying our dream house.

Here's why buying our first inexpensive house ended up helping us to get into the larger property that checked all our boxes, that we hope to stay in for a long time, and that still has an affordable monthly mortgage payment.

Getting started on the path to homeownership helped us buy our dream property

When we purchased our first house, it was a smaller one that needed a little bit of work. But we were able to easily afford it at the time and make a down payment on it, so it was the right fit.

We also hoped the initial purchase of this imperfect property would one day help us buy a house that was better for us. That worked out well because the house we bought went up in value, and we were able to pay down a good portion of our mortgage while living there.

Since our house’s value increased -- as often happens over the years in most normal real estate markets -- and since our mortgage loan balance fell, we were able to sell the house for considerably more than we owed.

Since we made money selling the home and walked away with cash even after paying back our lender, we were able to leverage that initial home purchase into a bigger house. We used the money we got when we sold to put a big down payment for the better, costlier house we were building.

Why this approach worked well for us -- and tips on making it work for you

This approach worked well for us for a few key reasons.

First and foremost, we made a reasonable size down payment on the property we initially purchased and we paid our loan diligently. As a result, we maximized the chances we would be able to sell the home for much more than we owed on it in order to help us amass the down payment we needed for a bigger house.

Second, we made sure we didn't overpay for the first house and we chose a property that would hold its value well. We researched houses carefully, found one that we could do a little DIY upgrading, and chose a house in a location that we knew would always be in demand. This also increased the likelihood we'd be able to sell the house for a tidy profit.

Finally, we made sure we used all of the extra money from the home's sale to make a big down payment on the new house. We did this both so we could keep our borrowing costs down and so we'd have a wide choice of lenders offering a favorable rate because our big down payment reduced their risk.

If you someday want to buy a big property, you may want to consider purchasing a smaller one first if you can make this work for you by taking the same steps we did. At worst, you'll still end up with a house that helps you build wealth -- even if it's not the perfect property. At best, the starter home you buy could allow you to more easily get into your dream home.

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