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.
Many potential buyers have long dreamed of the granite counter tops and open floor plans that will adorn their first-time home. But the reality of what they can afford tends to be a lot different. So does what they want today as opposed to what they will want a few years down the road. As a result, many first-time homebuyers make the wrong choice. They opt for layout over affordability or make a buying decision based more on gut than an analysis of their lifestyle and budget. (For more on this subject, check out: First-Time Homebuyer's Guide.)
But that doesn't have to be a foregone conclusion for first-time homebuyers, granted they are willing to approach the buying process from a practical rather than emotional standpoint. Sure, the granite countertops are important, but so is the commute to work. From figuring out how much home you can afford to taking a glimpse into the future, here are five considerations when shopping for a starter home.
Affordability Should Drive the Decision-Making Process
Just because you can afford a 2,500-square-foot home sitting on an acre lot doesn't mean you should buy it. 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. If the mortgage company said they can afford it, then why not go for the home at the top of the budget? But doing that can create a bad financial situation if the homeowner is struggling to pay the mortgage each month or if all of the money is tied up. If all of your money goes to maintain your home, it may quickly become a source of resentment.
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, opt for a more affordable starter home that won't break the budget and leaves room for entertainment or unexpected life expenses that will undoubtedly arise. (See also: Why Your First Home Shouldn't Be Your Dream Home.)
Consider Your Commute
It's easy to be lured into purchasing a property because it is move-in ready, has a pool in the backyard or meets all the buying requirements on your list. But first-time buyers have to consider more than the floor plan. They have to make sure the home fits into their lifestyle and the things that matter – whether it's a short commute to work or being near 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 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. First-time buyers spend a lot of time thinking about what they want inside the home but give less thought to how it works with their lifestyle.
Think About Your Future Self
Most people purchasing a starter home aren't giving too much thought to five or ten years down the road. But not glimpsing into the future can result in a costly mistake. Take children for starters. A couple may not be gearing up to become parents in the next couple of years, but it may happen further down the road. If they don't consider the possibility, they 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 take a single person looking to purchase his or her first home. Buying smack in the center of a city's nightlife may be ideal when you are in the throes of dating, but when you settle down, you may want a quieter locale. While it's hard to see the future living in the present, looking into the crystal ball and incorporating what you see into your buying decision can ensure that you are making a sound choice. (For more, see: Top Tips for First-Time Homebuyers.)
Choose a Property That's Been Maintained
Home improvement shows make it look easy to do all sorts of renovations, but the reality couldn't be farther from the truth. Just because you are purchasing a starter home doesn't mean it has to be one that needs a ton of upgrades and renovations. For first-time buyers, it's better to go with a home that has been properly maintained and doesn't require a lot of repairs or upkeep. Owning a home is costly in and of itself, but add repairs and remodeling to the mix, and first-time buyers can quickly get in over their heads. If the windows are cracked, the property looks unkempt or there are signs of exterior damage, move on to a more maintained property.
Have an Exit Strategy
Starter homes aren't for forever, which means you want to purchase a home that has the potential to make you money when you do decide to sell. As a result, you want to have an exit strategy in mind for the property you are purchasing – whether that means choosing a home that will be easily rented in the future or one in a good school district that can easily be sold. The last thing you want to do is be stuck with the property when you are ready to unload it.
Homeownership can be empowering, but it's also a daunting process, especially for first-time buyers. Mistakes abound on the path to homeownership, but many can be avoided. By choosing a starter home well within your means, considering your current and future wants and needs, and having an exit strategy in place, you can ensure that you make the right homebuying decision from the start. (For additional reading, check out: How to Buy Your First Home: A Step-by-Step Tutorial.)