First-time homebuyers have a lot riding on their home-purchasing prowess. After all, it's probably one of the most expensive purchases they'll make in their lifetime. Potential buyers often have dreamed of key design elements, such as granite countertops and open floor plans, but the reality of what they can afford might be a lot different.

Similarly, there can be a gap between what the buyer wants today as opposed to what they will want or need a few years down the road—say, when they start or expand their family and don't have adequate room. These discrepancies may lead many first-time homebuyers to make the wrong choice. They opt for the layout over the affordability or make a buying decision based more on their gut than on an analysis of their lifestyle and budget.

First-time homebuyers who are willing to approach the buying process from a practical rather than a mostly emotional standpoint can avoid these mistakes. Sure, granite countertops may be important, but so are having mortgage payments that aren't too much of a stretch and a commute to work that isn't onerous. As part of considering how much home you can afford, consider these five questions to ask yourself when you are shopping for a starter home.

Key Takeaways

  • When buying a first home, it's important not to let emotional factors supersede practical considerations.
  • Choose a home you can afford, so you can remain in it for at least the five to seven years it may take to recoup your costs and see a return on your investment.
  • Try to take into consideration both your current lifestyle and your future plans, especially if you are thinking of starting a family.
  • Make sure the home has been maintained and that it has resale value in anticipation of the day when you are ready to move on.

Can You Afford This House?

When shopping for a starter house, some first-time buyers will get preapproved for a mortgage and then shop based on the maximum they can borrow. After all, if the bank or mortgage company said they qualify for a certain amount, why not go for the home at the top of the budget? But just because you've been told you qualify for that 2,500-square-foot home on a one-acre lot doesn't mean you should buy it.

Doing so may cause financial difficulties, which could leave you struggling to pay the mortgage each month. If all of your money goes to maintain your home, it may quickly become a source of resentment. What's more important than what you qualify for is what you actually can afford.

Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).

Since most experts say it's best to stay in the home you purchase for five to seven years to recoup the costs and to see some return on your investment, you want to purchase a property you can afford. Instead of going all-in with your first home, it's wiser to look for a more affordable starter home that won't break your budget and leaves room for entertainment or the unexpected life expenses that are sure to arise.

Does It Fit Your Lifestyle?

First-time buyers tend to make the mistake of thinking about what they want inside the home instead of other factors, such as the distance from friends, family, stores, and work. As a result, you may be lured into purchasing a property because it is move-in ready, or it has a pool in the backyard, or it meets all the buying requirements on your list.

But as a first-time buyer, consider more than the floor plan and amenities. You need to make sure the home fits your lifestyle and the things that matter to you and your family if you have one—whether it's a short commute to work or being near extended family.

The last thing you want to do is purchase a home that is far removed from everything you care about. Not only could it increase your expenses if you spend more money and time commuting, but it can cost you emotionally if you are stressed out from sitting in traffic each day or don't see your friends and family as much as you'd like. Make a list of these kinds of lifestyle priorities and factor them into your buying decision.

Beware of ending up “house-poor”—taking on such a large mortgage that after making your monthly mortgage payment, you have limited funds left for other costs, such as utilities, vacations, entertainment, or even food.

What Will Your Future Self Want?

Most people purchasing a starter home aren't giving too much thought to their lives five or ten years down the road. But not peeking into the future can result in a costly mistake. Consider your plans for having children, for example. You and your spouse may not be gearing up to become parents in the next couple of years, but that may be a consideration down the road. If you don't consider that possibility now, you could end up purchasing a starter home that won't meet the needs of a growing family or that is unsuitable for small kids.

Or let's say you are single and looking to purchase your first home. Buying in the center of a city where there's plenty of nightlife may be ideal when you are dating, but when you settle down, you may want a quieter locale. While it's hard to peer into the future while living in the present, thinking about your longer-range plans and trying to incorporate them into your buying decision can ensure that you make a choice that works for today and tomorrow.

Has the Property Been Maintained?

Home improvement television shows make it look easy to do a variety of renovations, but the reality couldn't be farther from the truth. Just because you are purchasing a starter home doesn't mean you should choose one that's a fixer-upper, with a lot of needed upgrades and renovations.

First-time buyers are better off purchasing a home that has been properly maintained and doesn't require a lot of repairs or upkeep. Just routine maintenance for a home is costly, not to mention repairs and remodeling. If major repairs or replacements are needed, it might be best to move onto better-maintained properties.

Do You Have an Exit Strategy?

Starter homes aren't meant to be owned forever, which means you want to purchase a home that has the potential to make you money when you do decide to sell.

That means you will want to have an exit strategy for the property you are purchasing, whether that means choosing a home that will be easy to rent in the future or one in a good neighborhood or school district that can easily be sold. The last thing you want is to be stuck with the property when you are ready to move on.

The Bottom Line

Homeownership can be empowering, but it's also a daunting process, especially for first-time buyers. Mistakes are all around on the path to homeownership, but many can be avoided. Start by choosing a starter home well within your means that meets your current and future wants and needs, but also have an exit strategy in place.