Mortgage interest rates have been dropping, and currently hovering at 3 ½ percent. Over the past 12 months, the overall rate decline for 30-year fixed rate loans has reached one percent. There are many people who are financially qualified to make a purchase, but just can’t seem to find the right home in their price range.

If your landlord called you unexpectedly and said that your rent was going to drop $150 per month, you’d be ecstatic!  Well, if you borrow $250,000 at today’s rates–compared to last year–you’d be saving $150 per month.

When people make a “dream-home” wish list, they set certain financial limits on how much they will spend on the purchase price, property taxes, and other expenses such as condominium dues. A homebuyer’s wish list will likely include property features such as “large yard, eat-in-kitchen, 3 bedrooms, 2-car garage, and so forth.” Location choices would specify cities and towns, and perhaps other preferences such as “close to schools or public transportation.” It can take six months or even a year to find a home that meets all your requirements. If real estate prices keep rising in your area, the search grows more challenging.

For decades, many people have bought “starter homes,” because that’s all they could afford when interest rates were much higher. After five or ten years, these homeowners took the cash equity out of their home to use as a down payment on a “move-up home.” Many families look back at their starter-home years as some of their best memories, where long-lasting friendships began in a close-knit neighborhood.

When considering a starter home, look for two important criteria. First, a good location, and in a community that fits your lifestyle. Second, look for a house with potential. Is the yard large enough to build an extension, or add a garage?  The house might appear out-dated if the kitchen and dining rooms are small; however, if the dividing wall can be safely removed, you might have your ideal country kitchen after all.  Perhaps what begins as a starter home can become “the home of your lifetime.” 

Take another look at your dream-home wish list again, and think about what matters most. Before making an offer, hire a home inspector who can tell you what structural changes can be made. No need to rush–sometimes it’s good to live in a house for awhile so you can fully visualize your design ideas.

Take advantage of the opportunity to get a really low rate. If you stay within your original budget, you’ll end up with extra money each month to spend on decorating your new home!