Starter Home or Forever Home: Which Is the Best Option?

When you begin the process of buying your first home, one of the first things you must decide is whether you’re buying a starter home or a forever home. There’s no right or wrong option here. They each have their pros and cons, and it really depends on your financial situation and short-term and long-term goals. To help you make the right decision for you and your family, below, we break down the differences between the two, their pros and cons, and tips on choosing the best option.

What is a starter home?

A starter home is an entry-level home that you plan to live in for a few years. It has the basic things you need and maybe some things on your home wish list, but not everything. It’ll likely be on the smaller size, which works fine for you and your family now, but you’ll probably outgrow in a few years. 

Starter homes are popular among young, first-time buyers because they’re less expensive, which means it won’t take too long to save up for a down payment. This option allows you to start building equity sooner rather than later, which you can’t do if you continue renting. 

Once you’ve lived in the starter home for a few years and you’re ready to expand into a bigger home, you can sell the house or rent it out and create an additional stream of income. 

Starter home pros

• They’re more affordable. 
• It’ll take less time to save up for the down payment. 
• Homeownership comes with some tax benefits.
• Smaller homes have cheaper costs, too, such as property taxes, maintenance, etc. 
• When you sell the starter home, you can put the profit toward your forever home. 
• When interest rates are low, you can jump on the opportunity and not miss out. 
• You’ll start building wealth sooner. 

Starter home cons

• The home may not have all the features you want. 
• You’ll likely outgrow the home in a few years.
• Some starter homes are fixer-uppers and may need many repairs.
• Due to their high demand, it may be tricky to find a quality starter home in a desirable area. 
• The costs of owning a home are higher than renting. You’ll have to pay for mortgage, property taxes, insurance, and maintenance as well. In some cases, you may be better off saving that additional money for your forever home. 
• If property value goes down, you may end up owing more than the home is worth, which means you’ll need to live there longer than expected until the market recovers. 

What is a forever home?

As its name suggests, a forever home is a home you plan to live in forever or at least for a very extended period. A forever home will likely have all the features that you want in a home, whether it’s a big backyard, a certain number of rooms, or something else. And, it’ll be spacious enough for your family to live there comfortably now and grow into for years to come. 

The biggest thing that deters first-time homebuyers from skipping the starter home and going straight to the forever home is money. Because forever homes are typically more expensive, it can take longer to save up for a down payment. We’re talking years and years, which means you’ll be renting during that time and not building any equity or experiencing the joys of homeownership. 

Forever home pros

• Forever homes have everything you want in a home. 
• It has enough space for your family to grow into over the years. 
• You can happily settle in knowing you’ll be there for a very long time. 

Forever home cons

• Forever homes are more expensive. 
• It can take many years to save up for the down payment. 
• You must be ready to settle down and make a long-term commitment to the home and the neighborhood. 

How to decide between a starter home and a forever home

Still can’t decide between a starter home and a forever home? Keep reading for some decision-making tips. 

• Compare the price difference—If starter homes and forever homes in the area you want to buy aren’t that differently priced, it may make more sense to hold off a bit longer and buy your forever home from the get-go. If, on the other hand, the price differences are more significant, you’ll have to decide if you’re willing to wait longer to own a forever home.
• Think of your family’s future—It’s recommended to live in a home for at least five years before selling it to ensure you’ve built up equity. Ask yourself where you see your life in the next five years and beyond. When choosing a starter or forever home, consider your current lifestyle and your fufture lifestyle and see which one aligns best with your long-term goals. For example, if you’re planning to travel a lot or move away in a few years, a forever home may not be the best option for you right now.
• Research the local real estate market—If you know what area you’d like to buy in, do your research first. Are home prices rising or falling? If the prices are rising, it could be an excellent time to buy your starter home and sell it for a profit down the road. If, on the other hand, the prices are falling, it’ll probably be wiser to wait to avoid the risk.
• Buy what you can afford—Above all else, choose a home that you can afford. You don’t want to end up house poor, meaning all your money is tied up in your home. Use our affordability calculator to help you estimate how much house you can afford. And don’t forget to factor in other homeownership expenses such as moving costs, property taxes, maintenance, renovations, repairs, homeowners’ insurance, and utilities.
• Talk to an experienced real estate agent—Lastly, chatting with a trusted agent would be super helpful in making your decision. They are savvy about what’s happening in the local real estate market and can offer more individualized guidance for your specific situation. 

The solution

If you’re still unsure whether to purchase a starter home or a forever home, the alternative option is to find a home that’s somewhere in the middle. It may not have everything you want and desire in a forever home but will have enough room for you and your family to grow into in the coming years and be moderately priced. 

All in all, deciding between a starter or a forever home is entirely personal. Trust your gut. Go with the option that feels the best for you and your family and aligns with your future goals.