Tuesday, February 7, 2023

6 Benefits of Purchasing a Modest Home as a First-Time Buyer

Are you a renter who is considering buying your first home? Becoming a homeowner is an exciting decision that will change your life in many ways. With so many beautiful properties, it’s easy to fall in love with them all.

If you’re beginning the home search process, you may want to consider choosing a modest property for your first home so you don’t accidentally overbuy beyond your means. Here are some benefits of purchasing a modest home as a first-time buyer.

1. You’ll have more wiggle room in your budget

You likely won’t end up with too much pressure on your budget if you buy a modest home. Many potential buyers become emotionally attached to expensive, large homes but don’t consider how their finances will change with their purchase. If you overbuy, your budget may be tight.

When you choose a smaller or more affordable home, you have more ability to live a comfortable life without feeling stressed about your personal finance situation. If a life change were to happen, such as job loss or divorce, you’ll be more likely to be able to continue to afford your mortgage payments without worry.

2. Utility costs are more manageable

Another benefit to buying a modest home is that the utility costs will likely be more affordable. When you go from renting to buying, it’s important to consider all of your living costs — not just your monthly mortgage payment. A larger home can mean higher utility costs, so you’ll have to spend more of your money on home expenses.

3. You may find it’s easier to save up for a down payment

If you plan to finance your home purchase, you’ll need to consider how you will come up with a down payment. If you choose a modest home at an affordable price point, reaching your down payment savings goals may be easier.

Let’s imagine you want to save 10% for a down payment and are looking at a smaller home priced at $175,000. You’ll need to come up with $17,500 to reach your down payment goal.

If you instead buy a larger home priced at $300,000, you’d need to save $30,000 for a 10% down payment. That’s a lot more money to come up with before closing.

4. It’s less expensive to furnish than a larger home

Many first-time buyers focus on the property and don’t consider how they will furnish their home. If you already have some furniture from renting, that’s a win for your wallet. But if you buy a large home with many more rooms, you’ll eventually need to furnish them. If you instead buy a modest home, it can be more affordable to furnish your new space.

5. You can afford to pay down your mortgage faster

If you’re hoping to pay off your mortgage early, it’ll be easier if you have a lower mortgage payment amount. Many people with affordable mortgage payments make extra payments towards the loan’s principal to pay off their debt faster.

If your monthly mortgage payment is around $1,300, you may have more ability to make extra mortgage payments. But if your mortgage costs around $2,200 each month, it may be harder to swing additional payments because you have less room in your budget.

6. There’s less potential for clutter and less to clean

When you buy a modest home, you can enjoy a simpler life. There will be less room for clutter, and you may feel less tempted to buy junk. Plus, you may find that your property is a lot easier to care for and clean because there are fewer rooms and less work to do.

Before jumping into homeownership, consider the actual cost of owning a home. There are many properties to choose from, but some are more expensive and require more work than others.

This article was written by Natasha Gabrielle from The Motley Fool and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.