| The History of the Starter Home | | | | older home. |
| The concept of starter homes came into being during | | | | 2. Home Buying Costs There are significant costs |
| the post-World War II era as many young families | | | | each time you buy a home, including a whole new set |
| sought to fulfill the American Dream by owning a | | | | of closing costs, commissions, moving expenses and |
| home. William Levit, known as the Father of American | | | | more. |
| Suburbia, made those dream come true when he | | | | 3. Mortgage Terms Your mortgage may be subject to |
| initiated the idea of mass-produced, affordable, | | | | pre-payment penalties if you pay off the loan early, |
| stand-alone homes. He initially built over 17,000 homes | | | | typically within the first three to five years of the loan. |
| in what became known as Levittown, NY. Lenders | | | | Pre-payment penalties may be presented to you as |
| provided low cost, government-backed loans to the | | | | an option in exchange for a lower interest rate. You |
| homes' buyers; many of whom would not have | | | | may be tempted to accept this offer but do so with |
| otherwise been able to afford a place of their own. As | | | | extreme caution. Remember, this is your starter home |
| a result, the starter home was born and its appeal still | | | | and odds are you will want to move sooner rather |
| exists today. | | | | than later. At the very least be prepared for the fees. |
| The Modern Day Starter Home | | | | If you have not agreed to a pre-payment penalty, |
| Today's typical starter homes are small, one or two | | | | make sure to carefully review the truth-in-lending |
| bedroom houses that are often older homes or homes | | | | statement to confirm the pre-penalty terms listed are |
| in low-cost developments. The advantages of this first | | | | accurate. |
| home are many. First time home buyers who are | | | | 4. Home Renovations To make a starter home |
| willing to scale down their dreams in terms of size, | | | | functional and comfortable, you may decide to |
| location, and amenities are rewarded with lower down | | | | renovate or add on to the house. While generally, |
| payments, mortgage payments, insurance premiums, | | | | upgrades to major areas of the home like kitchens |
| and utility and maintenance costs. If all goes well, the | | | | and bathrooms are smart moves, will you be in the |
| home will appreciate in value and the buyers will have | | | | home long enough to re-coup these renovation and |
| built suitable equity in their starter home. The equity | | | | remodeling costs? You could put the house on the |
| along with the money saved as a result of the lower | | | | market for a few thousand dollars more than the |
| associated costs will be the ticket for first time home | | | | comparables in your neighborhood; but will that make it |
| buyers to someday (hopefully soon) move up and | | | | harder to sell? |
| purchase their forever home. | | | | 5. Resale of Starter Homes With fewer people buying |
| Why a Starter Home Might Not Be a Good Idea | | | | starter homes, keep in mind that there will be that |
| The advantages of buying a starter home appear | | | | many fewer buyers interested in yours when you are |
| quite attractive. However, let us take a look at why a | | | | ready to sell. |
| starter house may not be the house for you. By the | | | | 6. The Housing Market While a volatile real estate |
| nature of a starter home, you will most likely have | | | | market is of concern to all home sellers, a cold real |
| plans to graduate from the house after a relatively | | | | estate market can really put a wrench in your upgrade |
| short period of time. Perhaps you plan to upgrade | | | | plans. If your home drops in value, you will not have |
| when your family grows, when you secure that "great" | | | | built equity as planned and you may even have to sell |
| job, or when your children start in the public school | | | | at a loss. If this is the case, it may not be as easy as |
| system. Whatever the reason, you will be selling your | | | | you had hoped to get into your forever home. While a |
| home early on during the life of your home loan. There | | | | starter home is certainly a necessity for many first |
| are a few reasons why this may end up costing you. | | | | time home buyers, it may not always be the path to |
| | | | take for others. Carefully consider the risks and |
| 1. Price of the Home The cost of a smaller starter | | | | cautions highlighted above so that regardless of the |
| home does not drop proportionately to its size; much | | | | label attached to your new home (starter or forever) |
| of the value is in the land. This is especially true for | | | | you can be sure you bought the house that is right for |
| homes in desirable neighborhoods. You may end up | | | | you. |
| paying more than the perceived value for a small or | | | | |