Is it worth buying a starter home

amother

Orange

Thu, Sep 15 2022, 9:56 pm

It's like leases versus buying a car.

In the end of the day you are left with something, you have something to sell, money to buy a bigger house with. It's totally worth it BTDT

I look at people I know who rented for years and then eventually they do have to buy, but with what? Where's the money coming from? Your paycheck went to your landlord every month. (Unless you really have a lot of savings) I always feel really really bad for those people.

amother

Viola

Thu, Sep 15 2022, 10:18 pm

Of course it is worth it presuming the house is fair market value.

There is a reason why it is called a starter home because typically people buy it as their first home.

If you own a home you are going to be better off because eventually you will own something and a home is most people’s most valuable asset.

However starter home means you have to be realistic because you generally can’t move for at least five years because there are a lot of costs involved when you buy and sell homes besides the obvious moving fees. You pay closing costs, realtor commission and generally mortgage origination fees or some kind.

Sewsew_mom

Thu, Sep 15 2022, 10:21 pm

If it's not completely overpriced. And you can live in it for 3 years. And you have the money for a down payment and your monthly payment will be less than rent. What's the question. Nothing like owning your own place. And you have something to sell when your done.
If it's overpriced.. And market goes down alot.. You can lose money you thought you would save..

amother

Rainbow

Thu, Sep 15 2022, 10:27 pm

amother Orange wrote:

The people who are renting don't have enough for a down payment. I am in that situation. I would love not to be paying my landlord's mortgage. But we do not have enough saved up for a down payment, and our income is not high enough to cover all the expenses of owning a home (property tax, repairs etc). So we're stuck. We cannot afford a house now and I certainly don't think we're going to be in a better position in a few years when our kids are older. I don't know what the solution is.

amother

Orange

Thu, Sep 15 2022, 10:29 pm

amother Rainbow wrote:

100% I'm sorry if it sounded like I was putting you or people in your situation down. Not my intention at ALL.

It just sounded like OP is able to afford something. Or else she wouldn't be asking...

amother

Thu, Sep 15 2022, 10:40 pm

OP here. Actually its nice enough that we can realistically enjoy living there for at least 7 years. We do have a down payment but not enough that we can easily swing it. Our income is BH more than double our mortgage and living expenses but we don't have the full down payment needed. We are wondering if this amazing offer is something we should go borrowing for...

agreer

Thu, Sep 15 2022, 11:32 pm

amother Wandflower wrote:

We are in our starter home for 7 years now. The value went up 75% in that time and that extra equity is now being used to finance our dream home. I say if you can swing it go for it.

THIS is why you should buy a home as soon as you can afford to buy one.

In most normal situations, but especially in big frum cities, real estate always goes up. It might go down a bit, it may stay the same for a while, but over time, it always goes up.

That equity is what you'll IYH use to buy your forever home.

However, OP, if you don't have savings for a down payment, you can't exactly afford a home right now.

If you have a high enough income, however, you can try to go for a lower down payment (10-15%) and a higher mortgage, plus mortgage insurance. As soon as you pay down your mortgage to 20% down, you can get rid of the mortgage insurance.

I would definitely pursue that route, see what's available. I recently read that when the rates drop, it's going to be a seller's market again, and prices will rise. It's better to get into a house now and refinance later, so at least you'll have something.

My sister is in the mortgage business and she routinely gives this advice to people. Please PM me if you want her info.

Hatzlacha Rabbah.

amother

Razzmatazz

Thu, Sep 15 2022, 11:46 pm

amother Wandflower wrote:

We are in our starter home for 7 years now. The value went up 75% in that time and that extra equity is now being used to finance our dream home. I say if you can swing it go for it.

Sounds like you bought in 2015, which was still when the market was low, and much lower interest rates than today. BH I also bought then, 2014, and I am so so grateful. I cant say my house went up 75%, but its worth at least 200k more than what we paid bh. However, if I had to buy a house today I am not sure I would. Prices are now the highest they have ever been, ever, literally. I would be scared to buy something in this overbloated market with 5% interest rate.
However to the OP- I would definitely do it if I were you since it sounds like you can afford it once you get the down payment out of the way. And if you live in lakewood or another heavily populated jewish area then you can be reasonably assured that your investment wont fall. I would do it.
My only regret is that I myself didnt buy a starter home (we got married in 2008 so say we bought in 2010/2011, the market was even better/lower then), because if we did, we could have sold it before we bought our current house and had more money for a down payment and could have gotten a bigger house then what we have now, and ultimately if the house was bigger/better, it would be worth more than 200k more, which is what our profit margin would be on our current house- im not complaining god forbid, just saying. But we didn't feel comfortable because we weren't making a decent amount in our "starter home" days, and we were scared we wouldn't be able to cover.

SYA

Fri, Sep 16 2022, 8:03 am

There are fha loans for first time home buyers. You can put down 5-10% but the rates may be slightly higher. In addition you’ll have to pay PMI - private mortgage insurance (through the bank). Once you’ve paid 20% then you can file or refinance (depending on the bank) to have the PMI removed.

If you can afford to do that then definitely do it. Housing prices go up faster than our income. But once you own your home, after at least 5 years and you want to “upgrade” the price has gone up. Selling the starter gives you a large chunk to your next home.

watergirl

Fri, Sep 16 2022, 8:34 am

SYA wrote:

I say this all the time here - I bought with an fannie mae FHA loan for first time homebuyers. We put 3% down (which the seller paid) and ZERO PMI. We got a few $1000 grants towards closing, so all we paid at closing was $900.

We bought a house we could afford without stretching ourselves in an area we could afford and yes, it is a small star house. We have been in it for five years now and I’m sure we will be in it for many more years to come. It’s what we can afford. One day if we somehow come into a windfall then we will buy some thing bigger in a nicer area but we are very very happy now. Renting for so many years was incredibly stressful and the freedom of not being at the whim of a landlord enhances our quality of life so much.

amother

DarkKhaki

Fri, Sep 16 2022, 9:03 am

I'd say yes.

The cost of housing is rising. If you can get a good deal and build equity, your only helping yourself. Your money is going into you and your investment instead of into a landlords pocket.

That said with the rising cost of housing you may not be able to afford bigger in the future. So keep in mind that you may be "Stuck" in that starter home longer than you originally planned. Are you OK with that as a potential maybe?

mizle10

Fri, Sep 16 2022, 9:09 am

If you only plan to live in the starter home for 3-5 years are you actually gaining any equity in the house or is your money all going to interest? Plus closing fees etc. In Canada we have welcome tax as well. So you're really only gaining if prices significantly rise or you're planning on living there 5+ years.

amother

Cornsilk

Fri, Sep 16 2022, 9:40 am

Generally it's worth it. I bought a starter house. Rented the basement and it cost me.less than rent. I sold two years later and made a bit on it....not a lot at all but it got me into my new house. (This was 8 years ago). Bh I put in a tenant and my mortgage is same as my old house without the tenant.