For many aspiring homeowners, the idea of finding their forever home – the one they'll live in through all stages of life – is a dream that often seems out of reach.
The reality, is that the concept of a "forever home" might just be a myth, according to financial experts like Dave Ramsey, who famously stated, "When you buy your dream home, you'll find out your dreams change." Indeed, the numbers suggest that people tend to change homes more frequently than we might think, with the typical home in the U.S. changing owners every 12 years. So, if you're struggling with affordability and wondering whether you should hold out for your forever home or start with a starter, this article makes a compelling case for the latter.
Stop Renting, Start Building Equity
In the past few years, both mortgage rates and home prices have increased. However, buying a starter home may make more financial sense than renting for many individuals. Rent prices have also been steadily rising over the last three decades. This upward trend in rent costs can make it increasingly difficult to save for a house, creating a never-ending cycle of renting.
The solution? Consider purchasing a starter home, which can be a smaller house with less square footage, if you are financially prepared to do so. When you rent, you essentially pay your landlord's mortgage. But when you become a homeowner, you may start building your own home equity, making every monthly payment a step toward financial independence and security.
Enrich Your Life
Homeownership offers you a way to enrich your life. Owning a home may provide long-term financial benefits, as you make your monthly mortgage payments, your home's value may appreciate. The typical homeowner's net worth is estimated to be up to 40 times that of a renter. This significant difference highlights the financial advantage of owning a home over renting.
In addition to tangible financial benefits, homeownership creates a community connection, which often motivates homeowners to participate in local initiatives, associations, and volunteering efforts. Taking an active role in community well-being increases overall civic engagement.
Use Your Equity to Trade Up
Buying a starter home may allow you to begin building equity. Many starter homebuyers leverage the equity they gain to sell and purchase a larger house later. While this strategy is not without its risks, it has historically worked well for many homeowners.
Sell in a Competitive Market
We are still experiencing a housing inventory shortage, and affordable starter homes are in high demand in today's market. Given this demand, affordable homes should sell relatively easily, although factors like location, local market fluctuations, and the condition of the home will come into play.
The selling points of a starter home, such as lower costs for upkeep and maintenance, more affordable property taxes, and lower utilities, are likely to attract prospective buyers when you're ready to sell. The affordability and smaller size of a starter home may be a significant advantage in today's competitive real estate market.
Hedge Against Inflation
Inflation rates are soaring, and homeownership offers a measure of protection against these rising costs. As landlords often raise rents during periods of high inflation, nearly 65% of landlords have increased or plan to increase rent in 2023.
However, if you buy a starter home with a fixed-rate mortgage, your monthly payment remains secure for the foreseeable future. This means you won't be subject to rising mortgage rates. If rates decrease in the future, you also have the option to refinance and potentially lower your monthly payment, though refinance fees apply.
If you're contemplating whether to hold out for your forever home or begin with a starter, the latter option can be a wise financial move. It may help you escape the cycle of renting and offers a path to homeownership. So, if you're ready to begin your journey to becoming a homeowner, consider the benefits of purchasing a starter home and take that first step towards homeownership with Supreme Lending.
We understand that navigating the world of mortgages can be overwhelming for first-time and seasoned homebuyers alike. That's why we have a team of dedicated mortgage professionals ready to guide you through every step of the home financing process. Whether you're looking to buy your first home or refinance your current one, we are here to make the process hassle-free.