Starter House Or Forever Home? Considerations When Buying Your First Place

Women Who Money
9 min readJun 27, 2019

Buying a home is exciting. It’s also one of the most significant financial decisions you’ll ever make. So you want to get it right — and you want to get it right the first time.

If you’re buying your first home, you may wonder if you should buy a “starter” home or a “forever” home.

Will you grow out of a starter home too soon? Is spending more to buy a home you will live in longer a smarter decision?

What to Consider Before Buying Your First Home

Before you base a decision on your wants and needs alone, there are some other, crucial factors you’ll want to take into consideration.

Your Finances

How much can you really afford? How do a mortgage payment and other costs of home ownership fit into your budget?

Don’t just calculate the down payment and mortgage payments, but all the expenses of home ownership.

Property taxes and homeowner’s insurance will be added onto your monthly mortgage payment. Also, if you don’t have a 20% down payment, most lenders require you pay private mortgage insurance (PMI) each month.

The cost of PMI depends on your financial health and loan program. The cost of PMI can be anywhere from about .05% — 2.5% of your original mortgage.

You can use online calculators to figure payments. But you should also talk to a lender to get specifics related to your financial situation.

Questions to ask:

  • Are your finances in order?
  • Have you saved a down payment?
  • Do you have a steady income?
  • Do you have a handle on your debt?
  • Are you current on all your bills?
  • Would homeownership stretch your budget too far?

Interest Rates

Small differences in interest rates can make a significant impact on the affordability of a home. Even a 1% difference can make a big difference on a mortgage payment.

For example, if you borrow $200,000 at a 4% interest rate, your monthly…

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