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Potential Modern Issues With “Starter Homes”

potential issues starter homes

For many people who have reached a point where they’re ready to buy their first home, the “starter home” is the place they begin their search. This is a general term for a low-priced home that works for a smaller family or couple, one they can care for and live in for several years before moving up to a more permanent home.

At Primary Residential Mortgage, we’re here to tell you about some trends related to starter homes. Whether you’re using a conventional mortgage format or taking advantage of the FHA Loanprogram, VA loans or one of several other options, it’s important to understand how the market has shifted in terms of these kinds of homes – and why, in some cases, they might not actually be the right choice for your first home. Here are some basics.

Issues With Starter Homes

Roughly 45 million Americans will reach the age of 34 within the next decade, the average age at which the first home is purchased. This is a steep up from about 42 million people in that age range currently, meaning simple supply and demand for starter homes will change – there will be more demand, right off the bat.

At the same time, market trends show that homes classified as starters (those within the least expensive third of the overall market) have gained a lot of value in recent years – over 50 percent, in fact. Many of these homes have already been scooped up by families and rental investors, meaning inventory for this same bottom third has dropped markedly in recent years. Combined, this means there’s far fewer starter homes available, and those that are on the market are more expensive.

Are They Actually Cheaper?

Even if you are able to find a starter home in a reasonable price range, which is absolutely still possible, it’s important to consider whether it will truly be more cost-effective for you in the long run. With all the programs out there that offer low down payments, even for more expensive non-starter homes, you can often find situations where your upfront costs are very similar or even a bit less.

Mortgage rates are in a pretty good place right now, meaning that adding to your total loan amount won’t up your monthly payment by too much. Take some time to consider whether boxing yourself into the starter home realm might not be advisable.

Buying the Move-Up Home First

Many people who buy starter homes don’t consider the added cost and hassle of moving between two homes once the time comes. For starters, there’s much less competition for middle-tier homes just above the starter level, which often sit on the market for far longer. For another, starter homes are often cheaply renovated and may cause you additional expenses you weren’t considering. Instead of dealing with this hassle and resulting costs, assess your finances and decide whether you might be able to simply get the slightly more expensive home first and save money in the long run.

For more on recent trends with starter homes, or to learn about any of our mortgage loan services, speak to the staff at Primary Residential Mortgage today.

*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Florida Office of Financial Regulation MLD646. Opinions expressed are solely my own and do not express the views of my employer.

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