7 Things Millennials Should Know About Buying a Starter Home
There’s a lot to think about while shopping for any home, but starter homes have their own unique factors to consider. Starter homes are typically smaller 1 or 2 bedroom homes on the lower end of the price spectrum, and buyers usually live in them for a few years before moving on to a bigger “forever” home. With more and more millennials deciding it’s time to trade in roommates and studio apartments for backyards and elbow room, here are 7 things to consider when shopping for your first home.
1. The market is hot.
According to Case-Shiller, starter homes are the hottest segment of the housing market. Starter home prices have increased 85 percent in the past five years, compared to 63 percent for top-tier homes. Depending on your budget, you may need to compromise on some things like proximity to work or the number of repairs you’ll have to do.
2. Weigh your options.
How soon will you want to upgrade from your starter home? Do you have kids or are you planning on having them in the next few years? Are you likely to want to relocate soon to be closer to work or further from the city? Once you decide to move, will you be able to find renters for your starter home, or sell it for a profit?
3. Decide how long you plan to stay.
People typically stay in a starter home for 5-7 years. You can use this time to build equity rather than paying rent to a landlord.
4. Don’t be afraid to fly solo.
Historically people waited until they were married to buy a starter home, but today more and more people are delaying or forgoing marriage for school and careers, and buying their starter homes solo. You don’t have to wait for marriage to buy your first home.
5. Consider a condo.
If you want to live in the city, a house may not be the best option. Buying a condo or townhouse can be a more affordable way to live near your work and the bustling downtown nightlife. Plus you may be able to sell your downtown condo for a profit, or turn it into rental income when the time comes to buy your forever home.
6. Have your down payment ready.
A 20% down payment is required for most home loans. The sooner you start saving up for your down payment, the better. If you can, find an apartment with the lowest rent possible so you can rack up more savings before you shop for your home.
7. Shop the slow season.
You can find better deals and less competition for homes in the winter. Sure, fewer homes are being listed, but there are also fewer people actively shopping and going to open houses. Plus, a seller who lists during this time may need to sell quickly, which opens room for you to negotiate a deal.
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