First-time buyer: What if you need to sell in the future?
What You'll Learn: Everything you need to know about selling your home as a first-time homebuyer.
EXPECTED READ TIME: 5 MINUTES
It’s not uncommon to be thinking far into the future when you’re a first-time homebuyer. After all, buying a house is a huge commitment — so it’s important to find one that you can see yourself living in for years to come! However, sometimes life throws you a curveball. Even if your first purchase ends up being your dream home, people and their needs change, so it’s possible you may end up selling it in the future.
If you’re in the process of buying your first house, but you’re struggling to find one that checks all of your “forever home” boxes, don’t fret! It’s normal to feel hesitation, especially if you’re not entirely sure what your life will look like over the next decade.
In this article, we’ll outline reasons people end up selling their first home, why it’s recommended to buy a house that suits your current needs, and what you need to consider if the time ever comes for you to make the move again.
Why would you sell your home?
There are a number of reasons why you might need to sell your home, but most reasons come down to a change in lifestyle. This looks different for everyone. Here are few reasons you may end up considering a move in the future:
- You need more space. Whether you’re planning or in the midst of having children, or even considering moving in aging relatives, deciding to grow your family may mean you need more space than your current home provides.
- Your job is relocating (or your finances change). No one likes a long commute to the office, and if you find yourself in a situation where your job’s location is changing or you get a new job that’s further away, you may consider moving with it. You may also find you want to upgrade to a larger living space if you’re promoted. Or you might be looking to downsize if you or your spouse loses a job or someone wants to stay home full-time for your children.
- You need to downsize. Kids grow up and move out, people get divorced, or sometimes the maintenance to keep up property becomes too much. These are all valid reasons why you may end up wanting to downsize from a larger home to a more manageable property.
- Your needs in a home have changed. It’s normal for your lifestyle and needs to change for any number of reasons. Sometimes you outgrow the area you live in due to neighborhood changes and development, the need for a better school district for your children, or just because you desire a change in scenery.
It’s normal to outgrow a home and find yourself needing to sell it in order to move into the next phase of your life. That said, there is a reason a home purchase is often referred to as “laying down roots.”
While you have no way of knowing what factors in your life will change or when those changes will occur, it’s important to keep the next five years in mind when you are buying a house today.
How long should you live in a house before selling?
There’s no mandatory time frame you must adhere to when it comes to living in the house prior to selling. By industry standards, five years is a good rule of thumb. However, it’s important to note that the type of mortgage you secured for the purchase may in fact come with requirements for how long you must live on the property.
For example, if you purchased your home using a VA loan, you are required to live in the home as your primary residence for 12 months to meet the VA’s occupancy requirement.
How to minimize potential loss when selling your home
Not only is a home purchase a big financial commitment, but it can also be a worthwhile investment. Given that you spent money to buy the house, it’s expected that you’d want to make a profit from its sale once the time comes.
Opting for a larger amount for your down payment can set you up for more profit when you’re selling, especially if that happens sooner rather than later. Your down payment is your initial equity stake on the home: so, if you put down 20% on a $300,000 house when you buy, you’ll already have $60,000 worth of home equity upon moving in.
Typically, the longer you are able to live in the home the better off you’ll be financially when the time comes to sell it as you’ll have built more equity. Home equity, at a glance, is the difference between the market value of a house and the amount still owed on the mortgage. Every time you make a payment toward the principal balance on your mortgage, you increase your equity bit by bit. The longer you are able to wait before selling, the less you owe on your mortgage. This means you’ll be able to secure a larger percentage of the profits from the sale.
Another reason to hold off on selling is that home prices tend to rise over time, so you may be able to ask for a higher price compared to what you initially paid. It’s important to pay close attention to the broader economic trends and home market temperatures before you decide to put your home up for sale. Ideally, you’ll want to hold off on selling until you’re in a seller’s market. It’s also worth noting that it’s better to wait to sell to avoid penalties and tax implications as a result of selling a home too quickly after buying.
Benefits of buying a home now, even if you have to sell it in the future
Second guessing yourself is a normal part of the homebuying process, especially if you’re having trouble finding a home that fits into your idea of “forever.” However, you shouldn’t feel it’s necessary to hold off on buying a home that fits your needs now in pursuit of that permanent mindset.
As a first-time buyer, if you have the means to secure a home that you can see yourself living in for at least a couple of years, it’s likely worth the investment! Rather than renting or staying with family, you can start building your own equity instead of paying for someone else’s mortgage. That way, you can increase your own wealth and turn a profit when you sell the home. It may even set you up to have the ability to afford your forever home when you do find it.
Good luck and happy house hunting.