What is a starter home and how much should you expect to pay?

Key takeaways

• A starter home is an affordable, entry-level property that often has fewer bedrooms and simple finishes. 
• The national median sale price is $385,000, but starter homes are usually priced well below this, with prices and options varying by region. 
• FHA loans can help buyers purchase a starter home with a low down payment, but extra costs like mortgage insurance may apply. 

Buying your first home is a big undertaking and milestone for many people. It's exciting, but there's plenty to figure out and lots of choices to make.

Here’s a look at what a starter home is, what it costs, how to buy one and common mistakes to avoid.

A starter home is an affordable, entry-level property meant for first-time buyers. It's often smaller and less expensive than what you might call a forever home.

“It doesn’t check all the boxes of a dream home but meets your needs for where you’re at now,” said Susan Larson, a real estate agent with eXp Realty in Seattle, Washington.

Starter homes often have fewer bedrooms, simple finishes and cost less than most homes in the area. In many cases, they're built to be accessible for buyers with limited budgets, making them a practical first step into homeownership.

The national median sale price is currently $385,000, according to Homes.com market data. Starter homes are typically priced well below the median in a given market, but the exact gap varies by location.

In many markets, starter homes may be condos, townhouses or smaller single-family houses. Their prices often reflect local demand, inventory and interest rates.

Regional differences can have a big impact on what a starter home looks like and what it costs. In urban areas, you'll often find condos or townhouses as entry-level options. In the suburbs or rural spots, single-family houses are more common.

Regional price differences, inventory and amenities shape what buyers can expect. To check the latest data for your area, visit Homes.com market reports. If you know the area where you want to buy, check out the neighborhood guides on Homes.com.

A starter home often comes with one to three bedrooms, basic amenities and may need minor updates. You'll often find them in neighborhoods with good resale potential, but they might lack luxury features or a lot of square footage.

For example, you may get a cozy kitchen instead of a chef's dream, or a single bathroom instead of two. However, these homes are easier to maintain and often cost less to heat, cool and repair.

A starter home is meant for short-term living, but not everyone follows the same timeline. Many buyers plan to stay in a starter home for a few years before moving up, while others may stick around longer if the home fits their needs.

A forever home, on the other hand, is chosen for long-term needs and personal preferences. Think space for a growing family, a big backyard or custom finishes.

Here's how most buyers tackle the process:

• Set a budget based on your income and expenses. 
• Get pre-approved for a mortgage so you know your price range. 
• Search listings online and in person. 
• Make offers on homes that fit your needs. 
• Close the deal and move in. 

It's smart to prioritize needs over wants, work with a trusted agent and use online tools to compare options. In most cases, patience pays off.

Common mistakes include overextending your budget, skipping inspections and ignoring resale value. For example, buying a home that needs major repairs may seem like a bargain, but it can quickly turn into a money pit. Smart buyers focus on affordability, location and future growth.

A starter home is often smaller, less expensive and meant for short-term living, while a forever home is chosen for long-term needs and personal preferences.

Prices vary, but starter homes are typically priced well below the median in a given market. Check local listings and Homes.com for specifics.

In many cases, yes. Many first-time buyers use FHA loans or other programs that allow for lower down payments. Keep in mind that FHA loans often require mortgage insurance premiums, which add to your monthly costs.

Urban starter homes are often condos or townhouses, while suburban and rural options are often single-family houses. Local prices and amenities vary.

This story was updated on May 18.