Do you want to buy your first home? Can’t afford the massive down payments?
You should consider compromising on some amenities and go for a starter home. A starter home is a home that has a low-down payment, low monthly payments on the mortgage and a lower interest rate. There are many reasons why it is cheaper than a regular home.
Maybe it older, located in a desolate place far away from the city center, or it is your lucky day– the owner is desperate to sell it off. Whatever the reason may be, it can be a great opportunity for any first-time home buyer looking for a low down payment.
What makes a starter home a great choice for a first-time homebuyer?
The concept of starter homes was first originated in the United States during the post-World War II era when young people were in a desperate need for a cheap and affordable home. Later people went on to consider owning a small one or two-bedroom house as a part of the American dream. So, there is no reason why a relatively tiny house shouldn’t be your first choice as a first-time homebuyer.
Tax deductions are a major factor(other than low down payments) that makes buying a starter home a good choice for a newbie home-buyer. A homeowner can deduct property taxes on the home that they own. The property taxes are levied by the local government, usually, they are anywhere between 0% and 4% of the home value. Imagine being able to save 4% on property tax each year?
The IRS has published a document stating the types of tax deductions a homeowner can claim. You can go through this document if you need in-depth details.
Secondly, buying a starter home is a low risk for a young person. If you are someone who just paid off your student loans, you do not want to embark upon another arduous journey. A starter home ensures tax deductions, low-interest rates, low monthly payments and tons of other non-financial perks. Why wouldn’t you consider it as a viable option?
Here are three things you should look for in a starter home.
1. Condition of the house
Although it is your starter home, you do have to stay here for more than five years. Maybe even more. So, make sure you hire a trustworthy home inspector and get your new home thoroughly checked. Problems like leakage, weak construction, foul smell, etc will not only make living in that house difficult but also cost you more in repairs.
2. Distance from your workplace
You don’t want to waste your valuable time scratching head in street traffic. Buying a home away from your workplace will not only eat up your time but is also expensive.
3. Resale value
Lastly, you should expect a resale value of at least 25-30 percent more than the price at which you bought the home. The resale value depends on locality, condition of the house, presence of hospitals and schools nearby, the buyers paying capacity.