Should You Buy a Starter Home? | BMO Harris
Connect with us
A small starter home.

When you’re buying your first home, should you look for a place where you could live for a long time? Or one that works for right now? Many first-time buyers assume that buying a starter home is the mandatory first step of homeownership. But that might not be the case for everyone.

So, should you buy a starter home? Let’s explore the idea of a starter home and help you decide whether buying one is the right move for you.

What is a starter home?

A starter home is a place that fits the needs of young people buying their first house. That means these homes are typically smaller in size and in the lower price range for your area. People who buy starter homes do so with the intent of staying in them for a few years, then selling it and buying something bigger and nicer when they can better afford to do so.

Those bigger places are typically considered “forever homes,” or a house that can accommodate your needs now and in the future. This is especially relevant if your long-term plans will require more space, such as growing your family.

Note that this isn’t so much about the quality of the home. Both starter homes and forever homes can be move-in ready or they could be fixer-uppers. It’s more about the factors that are more difficult to change, such as size and location, that will dictate how long you can live there comfortably.

Should you buy a starter home?

It’s a question that plagues first-time buyers. Should you buy a starter home now ? Or save up so you can buy a forever home down the road? The answer is, there’s no right answer. It all depends on a mix of what’s happening in the market and your personal situation. A few things to consider:

  • Interest rates. One good reason to scoop up a starter home is low interest rates. If rate are low now, it may be in your favor to lock in a mortgage now before they swing back up. Waiting too long may mean you get stuck with a higher rate, and can’t even afford that nicer home you were saving for in the first place.
  • Market conditions. You’ll need to consider whether you’ll be able to sell your starter home when it comes time to upgrade. That means you want your starter home to hold or appreciate in value over the next few years. Ask your real estate market about your local market conditions and whether you can expect a buyer’s or seller’s market.
  • Potential to rent. If the market won’t cooperate and you aren’t able to sell your starter home, would you be able to rent it out? This can help generate the extra cash you need to move and prevent you from getting stuck in a house that’s no longer right for you. Check out rents in the area and make sure they’d cover your mortgage payment.
  • Possible costs. While a starter home may be cheaper up front, there are also additional costs to consider. There’s the price of moving twice, plus a second round of closing costs. And if your starter home place isn’t in great shape, there are repairs that you might need to make that you won’t be around to enjoy. Try to focus on improvements that will increase the resale value of your home.

The bottom line

If you’re ready to buy your first home, you’ve probably thought about whether you should buy a starter home or if you should stretch your budget for a more long-term place. There’s no one-size-fits-all verdict when it comes to starter homes. But taking the time to think about the potential costs, market conditions and your financial situation can help you make a decision that’s right for you.

Comments are closed.


Offers are not contingent upon real estate agents referring clients to BMO Harris for any products or services.

  1. Special offers are subject to change without notice. Closing cost discount of $100 on a new BMO Harris mortgage loan with Auto Pay from your BMO Harris Smart Money™ Account, BMO Harris Smart Advantage™ Account or BMO Harris Select Checking® account. The monthly maintenance fee for BMO Harris Smart Money™ Account is $5, BMO Harris Smart Advantage™ Account is $0, and BMO Harris Select Checking® is $15. Closing cost discount of $200 on a new BMO Harris mortgage loan with Auto Pay from your BMO Harris Premier™ Account or BMO Harris Portfolio Checking® account. The monthly maintenance fee for BMO Harris Premier™ Account is $30 and BMO Harris Portfolio Checking® is $25. FHA loans do not require Auto Pay to receive this discount. Mortgage closing cost discount can only be applied to the purchase or refinance of a primary residence and does not apply to Refi-Xpress loans, home equity loans, interim, lot and recreational land loans. Auto Pay means periodic scheduled payments automatically deducted from your BMO Harris checking account, as applicable, to pay the loan. When you sign up for Auto Pay, you authorize the Bank to draw your account for all amounts then due, including any late fees and any other charges. Checking account opening subject to bank approval.
  2. BMO Harris Bank offers affordable mortgage programs and works with various government and community organizations that offer down payment and closing cost assistance. Affordable mortgage programs may be subject to income limitations and other application restrictions. The amount of down payment, refinancing, and closing cost assistance available varies based on income and property location.