What to Look for in a Starter Home

Five practical thoughts for first-time homebuyers.

First-time homebuyers have a lot riding on their home-purchasing readiness. We've all heard that a home is probably one of the most expensive purchases you'll make in your lifetime. Potential buyers often dream of cool features, such as marble countertops and open concept living, but the reality of what one can afford might be a lot different.

In addition, there can be a gap between what you may want today as opposed to what you will want or need a few years down the road—perhaps, when you start or expand your family and don't have adequate room. These variances may lead many first-time homebuyers to make the wrong choice. You don't want to opt for the layout over the affordability or make a buying decision based more on your emotions than on an analysis of your lifestyle and budget.

First-time homebuyers who approach the process from a practical rather than a mostly emotional stance can avoid these mistakes. Sure, marble countertops may be nice, but so are having mortgage payments that aren't too much of a stretch and a commute to work that isn't gruelling. 
Consider these five questions to ask yourself when you are shopping for a starter home.

Can You Afford This Property?

When shopping for a starter home, some first-time buyers will get pre-approved for a mortgage and then shop based on the maximum they can borrow. After all, if the bank or mortgage company said they qualify for a certain amount, why not go for the home at the top of the budget? But just because you've been told you qualify for that 2,000-square-foot home on a one-acre lot doesn't mean you should buy it.

Doing so may cause financial difficulties, which could leave you struggling to pay the mortgage each month. If all of your money goes to maintain your home, it may quickly become a source of resentment. What you can actually afford is more important than what you qualify for.

Since most experts say it's best to stay in the home you purchase for about five years to recoup the costs and to see some return on your investment, you want to purchase a property you can afford. Instead of going all-in with your first home, it's wiser to look for a more affordable starter home that won't break your budget and leaves room for entertainment or the unexpected life expenses that are sure to crop up.

Does It Fit Your Lifestyle?

First-time buyers tend to make the mistake of thinking about what they want inside the home instead of other factors, such as the distance from friends, family, stores, and work. As a result, you may be baited into purchasing a property because it is move-in ready, has beautiful furniture (that's not included), or it has a pool in the backyard.

But as a first-time buyer, consider more than the floor plan and amenities. You need to make sure the home fits your lifestyle and the things that matter to you —whether it's a short commute to work or being near family.

The last thing you want to do is purchase a home that is far removed from everything you care about. Not only could it increase your expenses if you spend more money and time commuting, but it can cost you emotionally if you are stressed out from sitting in traffic each day or don't see your friends and family as much as you'd like. Make a list of these kinds of lifestyle priorities and factor them into your buying decision.

What Will Your Future Self Want?

Most people purchasing a starter home aren't giving too much thought to their lives five years down the road. But not looking into the future can result in a costly mistake. Consider your plans for growing your family, for example. You and your spouse may not be gearing up to become parents in the next couple of years, but that may be a consideration down the road. If you don't consider that possibility now, you could end up purchasing a starter home that won't fit the expansion or that is unsuitable for young children.

Or if you're single and looking to purchase your first home, buying in Toronto's entertainment district where there is plenty of nightlife may be ideal when you are dating, but when you settle down, you may want to be far, far, far away from that scene. While it's hard to look into the future while living in the present, thinking about your longer-range plans and trying to incorporate them into your buying decision can ensure that you make a choice that works for today and tomorrow.

Has the Property Been Maintained?

Home improvement television shows make it look easy to do a variety of renovations, but the reality couldn't be farther from the truth. Just because you are purchasing a starter home doesn't mean you should choose one that's a fixer-upper, with a lot of needed upgrades and renovations.

First-time buyers are better off purchasing a home that has been properly maintained and doesn't require a lot of repairs or upkeep. Just routine maintenance for a home is costly, not to mention repairs and remodelling. If major repairs or replacements are needed, it might be best to move onto better-maintained properties.

Do You Have an Exit Strategy?

Starter homes aren't meant to be owned forever, which means you want to purchase a home that has the potential to make you money when you do decide to sell.

That means you will want to have an exit strategy for the property you are purchasing, whether that means choosing a home that will be easy to rent in the future or one in a good neighbourhood or school district that can easily be sold. The last thing you want is to be stuck with the property when you are ready to move on.

The Bottom Line

Homeownership can be empowering, but it's also an intimidating process, especially for first-time buyers. Mistakes are all around on the path to homeownership, but many can be avoided. Start by choosing a starter home well within your means that meets your current and future wants and needs, but also have an exit strategy in place.