Did you want a "starter home"?

[wino55]

DH and I are shopping for our first home after living in apartments for the first six years of our marriage. We are in a good place financially and have recently significantly increased our HH income, so while we are not looking to buy anything huge (under 2000 sq ft), because of the neighborhoods we want to be in (based on schools and walkability) the home will have what I consider a significant price tag. We're trying to keep the features in mind that will keep us in the house for what we hope will be at least ten years and with two kids (we have none currently). I get a little anxious though thinking about the big increase in our monthly outlays and the fact that we will have three bedrooms for just us, for at least a year or two. But the only way to lower that budget but stay in the neighborhoods we want would be to buy a 2/2 (or 1) rather than a 3/2 or a fixer-upper, neither of which seem ideal. What was your mindset going into your first home purchase, or a purchase where you were in a similar position to us?

[kaylie]

I think you're smart to be cautious. We just bought our first house, which is not a starter house. We went with the non starter for a few reasons:
1 - interest rates are crazy low and buying this same house in the future would be more expensive
2 - the average 3 bedroom "starter home" price here is between $300K (for a not so nice townhome) to $375K (which will get you a nicer updated version) and have association fees between $50 and $450 a month. We paid $400 for our house which doesn't need anything non-cosmetic (yet), has no association fee. It's double the size of most of the town houses and has 1/3 of an acre for a yard.
3 - when you factor in the costs of selling, it made more sense to us to buy more now

I still think it was the right move, but two adults living in 3000 sq ft plus a finished basement is kinda stupid. Before this we lived in a 1200 sq foot two bedroom apartment. I know I'll be thankful for the space eventually but right now, it's excessive. We're using our formal living room as a storage room and two of the four bedrooms are completely empty.

Our electric bill has actually gone down because NJ charged more for it, but our mortgage payments are 55% higher than what our rent was and it's been an adjustment. We used to drop money on whatever we wanted and now we budget.

[housegeek]

What makes a house a starter home?

[sillygoosegirl]

I wanted a starter home very very much, but fortunately we resisted the urge. I think sometimes starter homes can make a lot of sense, but the housing market being what it has been for the last 7 years, a starter home would have been a bad move for us compared with renting until we are able to buy a house we will stay in for a long time. Especially since we haven't ended up being able to stay in the same state for longer than 3 years thus far (expected to need to move, but less).

I fear that in the near future, housing prices will continue to fall, or at least aren't likely to go up. So once you pay the Realtor to sell the starter home, etc, you'll probably take a sizable loss on the starter home over renting for that period. Compared with buying a more expensive home sooner, interest rates will certainly be going up sooner or later, and I'd rather lock in a low rate on a larger principle for a mortgage that I will keep for 1-3 decades than sell a smaller home after 3-5 years and then pay a high rate on that larger principle for only a few years less.

I think you can get around some of this if you buy a less expensive home that can grow with your family. Say a home with an unfinished daylight basement that you can finish when you need more space. Or something that is a bit of a fixer and can fix up rooms as you need the space. Since you don't get all your money back when you sell on improvements like this, it's a bit of a loss there, but since you have a smaller mortgage and don't have to move, you can come out ahead in the long run.

I do think that in a "normal" housing market, where you can expect your home to increase in value around 3% per year and interest rates to stay stable, a starter home can be a very good financial move. While you are in the starter home, you get lower mortgage payments than you would if you bought the bigger house. Assuming you kept it for 5 years, you could expect to get your down payment back when you sell along with around 10% of the house's value as profit after paying the real estate agent, and you would get to enjoy owning your own home for those 5 years. But I think anyone who expects that sort of "normal" behavior from the housing and mortgage markets in the next 5 years is completely nuts.

The home we are buying (hopefully--it's a short sale), is going to be enormous for just the two of us. It's 2300 sq ft. Actually, I think it'll be pretty big for us even after we have two kids. It has good bones, but could still use a ton of cosmetic work, and half of the back yard would need some very expensive landscaping to be usable. It probably needs $150K-$200K of work to be our dream home, but we could happily raise our children to college age in it with only maybe $30K of work beyond the normal maintenance we'd need anywhere. I like that IF we are ever in a position where we can comfortably afford a house worth $150K-$200K more than what we are comfortable paying now, we won't have to move to get everything we've ever wanted. And if we can't ever afford a lot of it (or, more likely, we just prioritize other things), it's still a good enough house in an exceptional location, where I am confident we will be happy.

[vanillahip]

I bought a "starter" I suppose, and I'm glad I did! But I bought it when I was single and 22. I've always been handy though, and I LOVE DIY projects, so I got a great deal on a sort of run down, very outdated foreclosure.

Now over 5 years later I'm married and we're probably going to start a family in the next couple of years. We're looking for a new home mainly because the market's just too good to pass up and we have the money. I could definitely see us starting a family here, but I really want to get a crapper of a house that I can gut (I say "I" because H would have no hand in it LOL, power tools are just not his thing) and make into our dream house. Probably not "forever" house but something we can enjoy for longer than 5 years!

I got a great deal on the current house, the market wasn't as bad as it is now and we would break even selling but it's not worth it to gut the 80 year old kitchen or rework the upstairs layout like I'd want to stay here much longer

[slug*bug]

We wanted a 'starter' home, but wound up in something that I can see us in for the long haul.

The differences in our situation compared to yours is that we were shocked how far our money would go in our desired neighborhood: we could've bought a starter in the neighborhood and moved into something larger down the road, but for a relatively low percentage more, we could get something to grow into. From that standpoint alone, it just didn't make sense to buy something smaller in our market.

The other difference is that our kids are toddlers now. When there's just one...or they're infants...it's hard to envision needing more space. But when we were looking at 'starter' homes now that they're 3 and 1, the timeframe for needing to sell again is condensed. It makes it less sensible (to us) to buy something that we'd be feeling cramped in in less than 5 years.

[Deleted]

We looked at some "starter" homes that were around 1200-1400 square feet and they all needed work. We just ended up finding another house with a little bit of a higher price tag in a good neighborhood that was all updated/remodeled at 1700 square feet and decided to go with it so we wouldn't have to do much work to the house right away. It feels a little bit, but I know we'll grow into it!

[candreco]

We did- we didn't want something a lot bigger than we needed since we were both traveling a lot at the time and didn't want to spend the bulk of the time we were home on yard work and maintenance. It also opened up some neighborhoods to us that we likely wouldn't have considered otherwise because of school districts.

We lived there for just under four years (and did a lot of work in it), and bought the house we're planning to stay in at least until we retire last month. We had a much better idea of what we liked and didn't like in a house, and what we could and couldn't live without, this time around.

I don't really look at our first house as a starter house, but as the one that was right for us at the time. We just outgrew it and our lives and needs changed.

[minniebee]

I bought a "starter home". I bought a condo back in my single days, when everyone still said that real estate was never a bad investment and renting is throwing your money away. I figured that if my situation changed and I needed to sell it in a few years, I'd at least break even. Soooooooo not true. I'm now stuck renting it out, at a loss each month, because the condo I bought as a starter home for $125K is now worth $50K.

I know so many people who are in a similar situation to me. Several of my friends are also reluctant landlords like I am, and several other friends are "making do" in small homes that they've long since outgrown, but they can't afford to sell them and move into something bigger.

Because I've personally had a bad experience with a starter home, I would be cautious about buying any home you don't intend to live in long term.

[lurkergirl123]

My husband and I sold our "starter" home in February (also, before we married I owned a townhouse and he owned a condo, so I guess those were "starters" too). We bought it in 2004. We sold in 22 days and made a profit. Not as much of a profit as we would have made a few years ago when the market was super hot, but we did pretty good. I have a ton of really positive, happy memories about that place.

That being said, with the market the way it is now, I think we just got extremely lucky. The house we have now is our "forever" house and I'm glad we bought when we did (our interest rate is super low). We had definitely outgrown our last place and I was concerned about selling.

[boiler717]

It depends. We looked at both long term homes and short term homes (5 years or less). We went into it with the mindset that any home we bought would be a long-term investment, but that we just might live in it for a short period of time.

We ended up buying a 2/1 in a fantastic urban area. We've lived in it for 3.5 years. We are moving in a couple of months to our long-term home, but keeping this as a rental and an investment. Our neighborhood is 50% rentals and there's a big rental market. We've done a lot of research and feel it's a great investment for us.

I would not buy a home that you plan to sell again in 3-5 years.

[aksinger]

We just bought our first home this year, after five years of marriage. We were not in a position to buy until now, and we moved from the city we had been living in for college/after college back to our hometown, so it didn't make sense to buy until now.

That being said, we have moved 7 times since 2003, and I was ready to be done moving! We're going to start having kids in the next 1-2 years and I have a business that I run out of my home, so we knew that our first home purchase was not going to be a starter home. We bought a 5 bedroom 3 bath house - it's one we can grow into as we start having kids and we won't have to upgrade in a few years, plus it still has plenty of room for my business. This is what worked for us, but I know a lot of people our age have already owned their homes for a few years and are now looking to upgrade out of their starter homes and into something bigger. I think it just depends on what your needs and timelines are!