Buying a *Starter Home* and factors to think about…and WWYD??

posted 3 years ago in Home
  • poll: What would you do?
    Buy the home as a starter home : (16 votes)
    29 %
    Wait until you find a forever home : (33 votes)
    60 %
    Buy the home as a forever home : (6 votes)
    11 %
  • Post # 3
    Member
    3280 posts
    Sugar bee
    • Wedding: June 2014

    I wouldn’t buy under those conditions. You can try to get the sellers to cover some of the closing costs, but 20K + a down payment does not seem worth it for a starter home. I also wouldn’t buy a starter home where the mortage is more than renting. Our mortage is $400 cheaper a month including taxes and insurance than it would be to rent a place half the size. I would take your time and either find a starter home comparable to the price or renting or wait awhile until you can buy a forever home. 

    Post # 4
    Member
    3442 posts
    Sugar bee
    • Wedding: July 2013

    @soy:  How much do you think you will make off of it someday?

    Also, a 30yr mortage is pretty darn long. When I took Dave Ramsey’s Financial Peace class, he talked about getting locked into a 30yr mortage, but paying it off in 15 years instead by consistantly paying extra every month & writing on the check “additional $x amount to be paid on principle”

     

    Post # 5
    Member
    4494 posts
    Honey bee
    • Wedding: November 2012

    I would include homeowner’s insurance and property taxes in your mortgage calculation.  A lot of people find they can afford their house payments then get a nasty surprise when they come to property taxes.

     

    Make sure there are no nasty surprises like mold, faulty plumbing, etc.  Major repairs such as those can be urgent and you don’t want to pay them within your first years of ownership when you’ve incurred a lot of expenses.

     

    Pay attention to the area – is the area up and coming, improving, declining?  If the area’s improving, your home’s going to appreciate in value, sometimes significantly.  If it’s a not-so-good area, you don’t want to pay for an overvalued property.

    Post # 7
    Hostess
    24457 posts
    Honey Beekeeper
    • Wedding: June 2009

    I wouldn’t buy this house.  Since the payment is higher including your insurance and property taxes it isn’t the best situation to buy a house that you aren’t in love with.

    Post # 8
    Member
    774 posts
    Busy bee
    • Wedding: October 2011

    I wouldn’t buy it. 

    My husband and I bought our “starter home” this year, but our mortgage payment + Home Insurance + property taxes is still $250 less each month than what we were paying to rent. We got a 15 year loan on it as well. I don’t feel bad about only staying in this house for 5-10 years because we got such a good deal on it.

    In your case though, it really doesn’t sound wise to buy. Especially if you aren’t going to want to stay in it for very long. Just my 2 cents. Good luck! 

    Post # 11
    Hostess
    24457 posts
    Honey Beekeeper
    • Wedding: June 2009

    I didn’t see that you were doing some pretty major renovations to the house.  Would those help you to get a better price selling the home later on?

    Post # 12
    Member
    1403 posts
    Bumble bee
    • Wedding: February 2014

    TWENTY THOUSAND for closing costs?!

    Is that normal?  That seems really, really high and from what I’ve heard…fees and stuff are hard to get out of but a large chunk of closing costs are highly negotiable and mostly bullsh*t.

    That’s what the FI’s brother who is in the mortgage industry says anyway.

    Post # 13
    Member
    2394 posts
    Buzzing bee

    I think the main things to consider would be buying a home that has all the basics — good location and schools — that you could “grow into” over the years by expanding later on if need be. And get a 15-year mortgage so you can pay it off while you’re still young.

    Post # 14
    Member
    10219 posts
    Sugar Beekeeper
    • Wedding: December 2012

    Well I can only tell you the story about my first house (also a Starter Home)

    We bought in the mid 1980s, when Interest Rates were high, much higher than they are now… and the job market was so-so (there was also a Recession)

    We bought our house and with all our expenses combined, were indeed paying more than our previous rent.

    Now we were fortunate in that the house was aprox 5 years old, and so large amounts of maintenance were not required… we did the usual stuff tho… like paint, decorate (ie change out light fixtures), steam clean the carpets annually, maintain the grounds etc

    5 Years later we sold our Starter Home with a HUGE Gain, as the market had improved, and were able to move into our Forever Home with a nice downpayment

    (Our Forever Home by the way, would have been entirely paid off in about 15 Years from the time of purchase.  So 20 Years of “Mortgages” vs 25, 30 etc. as we initially planned.  This is of course because we were able to make higher payments over time, as we got more established in our careers, made more money, etc)

    Anyhow, what I am saying here is you need more info about long term projections for the housing market in your area…

    AND that historically houses continue to climb in value even in spite of what looks like a poor economy…

    So what of these two houses ?

    Well our Starter Home that we bought in the mid 1980s at just over $ 80 K (and sold 5 years later for $ 120 K) today sells for around $ 330

    Our Forever Home we bought for $ 200 K in the early 1990s, and sold it 10 Years later for $ 375 K, today it sells for somewhere in the $ 475 to $ 500 K range.

    So there you have it…

    Houses that have BOTH increased in value substantially (more than $ 10 K per year)… whereas if you continue to rent, you’ll be spending more than $ 10 K annually that you’ll see virtually NO RETURN on whatsoever.

    The one thing I would say is that both our homes were in good locations… as they say in Real Estate… LOCATION IS EVERYTHING !!

    Buying or not buying is up to you… but I would certainly take some time to do some more research and speak with a longtime Real Estate Agent in the area you are considering to get their point of view before you rule out the idea entirely.

    Hope this helps,

    PS… You have to remember that some of the elements you are weighing… Maintenance, Real Estate Costs etc… are just part of the price of being in the Housing Market.  Altho there is a cost to them, they exist whether you have a Starter Home, Forever House, or a McMansion… they just are a fact once you are Home Owner vs a Renter.  They come with the territory… and will exist as long as you are in the Housing Market vs some other choice in housing.

     

    Post # 15
    Member
    774 posts
    Busy bee
    • Wedding: October 2011

    @soy:  It’s not. We got an amazing deal on it because the lady we were renting it from is one of those house-flippers so she sold it to us at a very low price. She bought it for next to nothing at an auction. I think the only reason she sold it to us for so cheap is because she had just bought it a couple months before we moved in and selling it to us meant she didn’t have to go to the trouble of trying to sell it. We also agreed to buy it “as is” which meant that we had do some work on the house ourselves. We had to buy a new air conditioner and water heater in the first year. But again, it was such a good deal it was worth it. 

    We also have really good credit thanks to my super responsible DH 😉

    In our situation, buying this house made absolute sense. Even though it only has one bathroom, so I can’t imagine living in it once our kids are teens. If it hadn’t been under those circumstances we probably would have kept looking until we found one that closer met our idea of a forever home. 

    Post # 16
    Member
    3442 posts
    Sugar bee
    • Wedding: July 2013

    @soy:  My dad is primarily a golf course constructor who works with architects such a Arnold Palmer & Pete Dye, but on the side he bought houses, fixed them up, & then sold them.

    One of the important things to consider if you are just trying to make the most out of the house is the only fix up things that will add to the value. LOTS of things that people want to add or renovate to their own personal houses does not actually increase the profitability, so your best bet would be to be 100% sure whether you want this to be your forever home or a starter home. If you start mixing your ideas on this you will waste a LOT of money.

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