Starter Home Or Forever Home: Which Is Right For You?

Oct 16, 2024

6-minute read

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Young Latino family happily settled in their forever home, expressing contentment and stability.

So you want to jump into the homebuying pool. The first question that comes to mind could be, “starter home or forever home?” – are you going to dip your toes into the market or dive in headfirst? Recent homebuying statistics show that first-time homebuyers made up 33% of all homebuyers in 2019.1

In the U.S., the median homeowner salary is $72,615 and renters' is $35,9622 – if those numbers are discouraging, know that there are plenty of paths to becoming a homeowner, with starter homes being the most affordable option.

There’s no clear-cut answer on which path is best, as it all depends on your personal situation and goals. We’ll explain what makes a good starter home and forever home, including their benefits and drawbacks. We’ll also help you decide whether a starter home or a forever home is right for you with a set of important questions and an interactive flowchart.

What’s A Starter Home?

A starter home is a smaller home or condominium bought as a first home. Properties typically have two bedrooms or fewer (or are a small three-bedroom). They also don’t usually have all the amenities you might want or they might be in a less-than-ideal location. This is a popular option with younger homebuyers because it’s less expensive and you can get it without waiting years to save up for a down payment.

Buying a starter home can give you the chance to save money and build home equity in a property at the same time – something you can’t do when you rent.

How Long Should You Stay In A Starter Home?

You should stay in a starter home for at least 2 years but ideally, you’d stay for 3 – 5 years. The reasons include avoiding capital gains taxes and earning money on your investment, which we’ll talk more about below.

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