Author: Dan Rafter / Source: Wise Bread

The old formula worked like this: When you were tired of renting an apartment, you’d buy a starter home. This starter home would be affordable and small. When your family started to grow, you’d sell that starter home and buy a larger residence.
Does this strategy still make sense?
Should you invest in a starter home before purchasing what you might consider the home of your dreams?Not surprisingly, the answer is complicated. But in most cases, a starter home is not necessarily the best financial move. That’s largely because mortgage dollars are so affordable today thanks to historically low interest rates.
This doesn’t mean that buying a starter home is a bad move, just that you shouldn’t consider it an essential step. Here are some reasons why a starter home isn’t always necessary anymore.
It’s more affordable to buy a bigger house
Mortgage rates have been rising, but these rates are still at historic lows. As of mid-June, it was still likely that if you had solid credit, you could qualify for a 30-year, fixed-rate mortgage loan at an interest rate near 4.5 percent.
When interest rates are low, it’s cheaper to borrow money. It also gives you more homebuying power. You can take out a larger mortgage loan and still be left with an affordable monthly payment, which means you can purchase a home with a bigger price tag.
Just be careful: You don’t want to stretch your budget too far. Only buy a home that leaves you with a mortgage payment you can afford each month, whether it’s a starter home or a more expensive residence. (See…
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