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Should You Buy a Starter Home or Forever Home?

The Short Version

  • Many factors come into play depending on a buyer's situation, including their current lifestyle and future plans
  • In a starter home, you should look for affordability, resale potential and location
  • Adults who have a stable career and a growing family may be looking to purchase a forever home


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The excitement of being a first-time home buyer is unbeatable. A home is one of the most important and largest purchases you’ll make, and it’ll have a significant impact on your financial future. 

The question that many first-time home buyers face? Should you buy a starter home or jump directly to your forever home? There’s no one answer. Many factors come into play depending on a buyer’s situation, including their current lifestyle and future plans.

To help you get started, we’ll discuss all of these factors to help guide you on your starter home vs. forever home decision. 

Starter Home, Defined

So, what’s a starter home? Buyers often purchase a starter home as a way to stop paying rent and get into the real estate market. They may know that this amount of space won’t be enough for them in the long term, but it’ll work for now. 

By the time they outgrow the space and need to upgrade, they will have built equity that they can access for their next and larger home buy. 

A typical starter home might be a townhouse, condominium or single-family house with one or two bedrooms. While that could always be enough space for some people, that may not be the case for those who want to start a family. 

For that reason, starter homes tend to appeal to young adults who want to maintain flexibility. A starter home is also more likely to be located in an urban area or an area with access to amenities, entertainment and lots of job opportunities that may have greater appeal to younger adults.

Forever Home, Defined

Unlike a starter home, a forever home is purchased with the intent to stay there … forever. A forever home is typically described as the buyer’s “dream home” because it has everything they’ve ever wanted in a house. 

A forever home is typically larger and more expensive than a starter home and is considered a long-term investment. Adults who have a stable career and a growing family may be looking to purchase a forever home. 

A forever home may also offer benefits such as access to a good school district and family-centered community assets. It also means you probably won’t have to move again. That way, you and your family can put down roots in the neighborhood and invest in making upgrades to a home you plan to enjoy long term. 

Starter Home vs. Forever Home: Pros and Cons

You’re probably here because you’re wondering if you should buy a starter home or a forever home. The answer depends on your situation. There are benefits and downsides to each option. To help you with the decision-making process, here are some important considerations: 

What are the pros of a starter home?

Buying a starter home is the more affordable option – but there are other advantages.

  • Easy to buy and resell: Starter homes can be easy to sell because there’s always a strong demand for entry-level homes and lower price points. (But read “trouble selling or renting out” in the “things to know” section, below.)
  • Investment potential: Starter homes tend to make attractive rentals, so if you choose to keep your starter home when you move to a forever home, it could become an investment property. (FYI: If you live in a condo or HOA community, there may be owner-occupied rules that prevent you from renting out your property or make it difficult.)
  • Less pressure to upgrade: Since this is a transition home, you don’t need to commit as much to upgrades and making the home perfect. And, if your starter home is part of a condominium community, you may have a condo association that covers maintenance for the building.
  • Lower monthly mortgage payments: A starter home generally costs less and comes with a lower monthly mortgage payment than a forever home in the same area. You can take advantage of this lower payment to start building equity to put toward your dream home. 

What are the things to know about starter homes?

Opting for a starter home before a forever home might come with a few challenges, including:

  • Smaller size: You may outgrow your starter home faster than you realize. 
  • Maintenance, repairs and renovations: Some starter homes are priced lower because they need basic renovations or repairs to be liveable. If you buy this type of property, be prepared to deal with the costs and time it’ll take to fix it up. 
  • Less desirable location: Some starter homes are built in less attractive areas to keep prices down and appeal to first-time home buyers. 
  • Trouble selling or renting out: if you buy in a declining area or if there are other restrictions on owner-occupancy, you may have trouble selling or renting it. 

What are the pros of a forever home?

There are lots of benefits that come with starter homes – but forever homes come with many advantages too, including:

  • Peace of mind: Knowing that the home is the one you plan to live in forever (or at least for a really long time) can help you feel more settled. 
  • Greater customization: With your forever home, you have the freedom to customize your home to what you are interested in, not what will necessarily appeal to future buyers.
  • Ability to grow into your space: You can grow your family (including pets!) without feeling cramped.
  • Potentially less competition when submitting offers: Depending on the area they are in, forever homes can see fewer offers because they’re not as affordable, and so there is a smaller pool of buyers.

What are the things to know about forever homes?

There are some drawbacks to forever homes, such as:

  • Higher costs: A forever home will have a higher purchase price, mortgage payment, property taxes and utility bills. 
  • Slower ROI: Since your forever home will be a bigger upfront investment and you’ll wait longer to buy it, you might see a slower return on your investment. 
  • More upkeep: More space means there’s more space to take care of.

Starter Home vs. Forever Home FAQs

Many factors go into a home buying decision. For advice that speaks to your situation, you should speak to a real estate agent, mortgage consultant or financial advisor. But, we also have a list of commonly asked questions to consider when choosing between a starter home and a forever home:

What should I look for in a starter home or forever home?

There are some key elements to look for in any home, starting with the price. Here are all the critical factors you should consider:

  • Affordable price: Whatever home you buy, aim for a price point that’s slightly lower than your maximum preapproval amount. It helps ensure that your monthly mortgage payments will be manageable, and you’ll have wiggle room for repairs and unexpected expenses. 
  • Priorities: Try to identify what’s important to you before beginning your search. A starter home may not check every box on your wish list, but buying a forever home that doesn’t match your lifestyle can cause financial and emotional strain down the road.
  • Good bones: Generally, buyers might be better off looking for homes that don’t require a lot of repairs and have been properly maintained. 

However, if you have a knack for DIY, a house with good bones might be the ticket into a good area with decent amenities or a way to afford a home in an area that might otherwise be out of your price range. 

Just make sure you don’t take on a home that requires more renovation and risk than you can handle, or that will exceed your budget. 

  • Investment potential: Have a realistic sense of how long you plan to stay in your home, so you can sell when it’s most advantageous. Search for starter houses in areas where you know there’s a good rental market or forever houses in areas that are likely to maintain or appreciate in value.

How much should I save for a starter home or forever home?

There’s no set amount of money to put aside. Instead, aim to save what’s reasonable based on your income and budget. 

  • Down payment: Even with the most generous loan programs like a Fannie Mae HomeReady® mortgage, you’ll need to save a minimum of 3% of the home’s purchase price for a down payment.[1] Keep in mind that anything less than a 20% down payment will likely cause you to pay more in interest and pay for mortgage insurance.[2]
  • Closing costs: Your closing costs will cost about 4% – 6% of the amount you’re borrowing. You may be able to fold some of your closing costs into your mortgage, but it’ll increase how much you have to pay back.
  • Other expenses: Be ready to cover moving expenses and any other expenses related to getting your new home, like repairs, upgrades and furnishing your new space.

Ideally, your total monthly mortgage payment, including taxes and insurance, won’t exceed 28% of your gross monthly income.

Read up on how much home you can afford for more guidance.

How long should I stay in my home?

Real estate agents often recommend staying in a home for at least 2 years, ideally 3 – 5 years. Staying this long helps you build equity. And because home values tend to go up over time, you can potentially earn more money on your investment. 

Staying in your home for 2 – 5 years or longer can also help you avoid higher capital gains taxes when you sell your home.[3]

The Choice Is Yours

Whether you buy a starter home or a forever home is a personal choice. The most important thing you can do is save money and prepare yourself to make this major purchase. 

Whether you’re looking for a starter home or a dream home, investing in either is a smart financial decision because it gets you into the real estate market, and you can start building equity. 

If it’s hard to break into the housing market with a starter home, there’s nothing wrong with waiting until you’re ready to become a homeowner.

Take the first step toward buying a home.

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  1. Fannie Mae. “HomeReady Mortgage.” Retrieved January 2022 from https://singlefamily.fanniemae.com/originating-underwriting/mortgage-products/homeready-mortgage

  2. Consumer Finance Protection Bureau. “How to decide how much to spend on your downpayment. Retrieved January 2022 from https://www.consumerfinance.gov/about-us/blog/how-decide-how-much-spend-your-down-payment/

  3. Internal Revenue Service. “Publication 523 (2021), Selling Your Home.” Retrieved January 2022 from https://www.irs.gov/publications/p523#en_US_2021_publink10008937

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