As a First Time Homebuyer, Are Starter Homes Worth It?

Estimated reading time: 3.5 minutes

In the current real estate landscape, there is a growing number of first-time homebuyers that are skipping the traditional starter home and purchasing their forever homes first. According to 2024 data from the National Association of Realtors, Americans across all age groups plan to stay in their homes for a minimum of 10 years—the length of time a person traditionally stays in a forever home. Should first-time homebuyers even bother looking at starter homes?

What Defines a Starter Home?

Starter homes, also known as entry-level homes, are typically the most affordable property for a first-time homebuyer. Because of their smaller size and often lower cost, buyers benefit from lower monthly payments and maintenance costs. They are meant to serve a homeowner’s basic needs, usually with fewer amenities than larger or newer homes, like brand new appliances. Traditionally, people would live in their starter home for three to seven years, or at least long enough to see a return on investment in their equity.

What is a Forever Home?

A forever home is a house you can plan to stay in for a long time. They are best for homeowners who are looking to settle for at least ten years or those who want a space that can evolve with life events, such as having children. Forever homes are larger and more expensive than starter homes, usually sporting at least 2,000 square feet of living space.

Why are Starter Homes Hard to Find?

High home prices and mortgage rates are making it hard for first-time homebuyers to find starter homes. According to data from the Census Bureau, about 40% of new homes being built in the United States in 1982 were under 1,400 square feet. In 2023, the percentage drops down to 9%. CNBC reports that restrictive zoning laws are one of the culprits for the drop of starter inventory. Laws have increased the cost to build homes of any size, making smaller builds unaffordable for some builders.

Are Starter Homes Still Worth It?

Starter homes are still great options for first-time homebuyers, even if they may be a little different than a classic detached single-family home. Townhouses and condominiums both provide homebuyers an opportunity to build equity without needing to worry about exterior maintenance costs.

As a First Time Buyer, Which Home is for You?

Whether you’re aiming for a starter home or your forever home, there are steps you can take to better your chances of making it to the closing table and into a home.

Broaden Your Search

If you’re having trouble finding an affordable home, consider expanding your search parameters. You may find the home of your dreams if you expand your search radius by five miles and consider other house types.

Choose a Mortgage Program That Works for You

You don’t need a 20% down payment to be eligible for a home purchase! In fact, according to the Mortgage Reports, the average down payment for first-time homebuyers was between 8 and 13 percent in 2024. There are also mortgage programs available that allow for 0% down, depending on location and buyer qualifications.

Build Your Team of Professionals

You aren’t in the homebuying process alone! By using a mortgage Loan Originator and a Real Estate Agent, you’re setting yourself up for success. Your Real Estate Agent can help you navigate the trickiest parts of house hunting, like negotiations and making an offer. Meanwhile, your Loan Originator will work directly with you to find a mortgage program that fits your financial goals and can provide a pre-approval letter to strengthen your offers.

Ready to learn more about what mortgage program works best for your home needs? Contact us today!