If you are a first-time homebuyer you are going to be facing a few questions of whether to buy a starter home or wait until you can afford a forever home.
Choosing between a starter home and a forever one needs to be done with care to avoid making a costly mistake. To help you in making the right decision, we’ve listed some of the most important factors to consider:
Interest rates have remained historically low but this can change anytime in the future. Buying a starter home now can give you substantial savings on your mortgage. If you choose to wait until you’ve saved enough for your forever home, keep yourself constantly informed on developments affecting interest rates so you can avoid unpleasant surprises.
Home prices have been rising significantly over the past few years, fueled by a high demand and low inventory in most markets. This can mean a starter home is your best option right now. If you wait, you just might find yourself being priced out of the market if the prices of homes continue to increase.On the other hand, there are indications that the housing market may be cooling off a bit and home prices may start to weaken. If this happens, waiting may prove to be more advantageous. Watch market trends closely for changes in home prices to help you make the decision.
Where do you want to live? If your preference is the suburbs, you’ll have a good chance of finding a starter home that you can afford. On the other hand, if you want to live in a central area with easy access to schools, work, and community amenities, you might find home prices here to be out of your current range. It might be necessary to build your savings first before you can buy a home in your preferred location.
Length of stay
If you’re considering buying a starter home first, you have to estimate how long you plan to live in it. If you’re moving out in less than two years, you may have to pay capital gains tax for the sale of the home.You also need to consider the cost of moving. This can be quite substantial especially if you need to furnish both your starter home and your next home from scratch.
If you believe you can save enough to buy your forever home within the next few months or years, it might be wiser to wait to avoid these costs.
Look into your present and future financial situation. How much have you saved and how much mortgage can you afford to pay monthly? Make a realistic assessment of your future financial prospects. Consider not only the mortgage but your other monthly expenses, as well, including routine home repairs and maintenance. Ideally, you should have enough money left after expenses to build your savings.
Your future plans
Are you planning on having a big family? If so, it might be wise to wait until you’ve saved enough for a forever home with plenty of space. You could find yourself needing to move to a bigger home earlier than expected to have sufficient space for your growing family.
If you need help as a first-time homebuyer in deciding between a starter and a forever home, give us a call at 865-588-1234. We’ll be happy to guide you and help you find the perfect property in Knoxville, TN or its neighboring communities.