A starter home is a home that acts as an entry point into homeownership for renters and other first-time home buyers. By definition, starter homes sell for less than the area median home sale price and may lack the features and amenities of other MLS-listed homes.
Starter homes have less space, fewer bedrooms, and fewer upgrades than “forever homes.” This is part of what makes them popular. Starter homes allow aspiring homeowners to stop renting, start building home equity, and begin benefitting from the responsibilities of homeownership. Homeowners often sell their starter homes and use their accumulated home equity as a down payment toward a larger, more expensive home within 7 years of purchase.
The most common reasons for trading up from a starter home include:
- Getting married
- Expanding a family
- Earning a higher income
- Selling a starter home may also come with tax breaks.
In the March 2024 State of the Union Address, President Biden announced a plan to award $10,000 in federal income tax credits to sellers who live in their starter homes and sell to a buyer who plans to make the home their primary residence. The sale price of a starter home may not exceed the county’s median home sale price to qualify it as a starter home. Property types can include single-family homes, condominiums, multi-family homes, and manufactured homes.
What should I look for in a starter home?
A good starter home meets your immediate needs, is within your monthly budget, and is located in an area that is expected to appreciate.
How long do people typically stay in a starter home?
Life moves at different paces for everyone, but it’s common for first-time buyers to stay in their starter homes for 5-7 years.
Can a starter home be a good investment?
Yes, a starter home can be a good investment. Buying in the right location and making smart improvements can increase the home’s value, and provide substantial home equity when you decide to sell. Source
DRE ID # 01769353
NMLS ID # 394275
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