The journey to homeownership is a major milestone, but for many first-time buyers in 2025, finding an affordable starter home is more challenging than ever. With a shortage of smaller, budget-friendly homes, buyers need to explore creative strategies to enter the market. One promising approach is purchasing a larger home with a jumbo loan and adding a rental suite to offset costs.
Why starter homes are becoming scarce
The availability of traditional starter homes has significantly declined, driven by rising land and construction costs. Builders are prioritizing larger, high-profit homes, making it harder for first-time buyers to find affordable options. As a result, many buyers are rethinking what a “starter home” looks like and considering alternative paths to homeownership.
Consider a larger home with a jumbo loan:
With fewer small homes available, a jumbo loan can help finance a larger property. While these loans require strong credit and financial stability, they provide an opportunity to buy a home that can grow with you over time.
Add a rental suite to offset costs:
Converting a garage, basement, or spare room into a rental unit can generate additional income, making a more expensive home more affordable. Many cities offer incentives or zoning allowances for accessory dwelling units (ADUs), making this an increasingly viable option.
Explore emerging neighborhoods:
Transitional or up-and-coming areas often have more affordable options than well-established neighborhoods. Researching local zoning changes and future development plans can help identify areas with strong potential for appreciation.
Stay flexible and open-minded:
Expanding your search beyond traditional starter homes—whether considering fixer-uppers, multi-family properties, or homes slightly outside your ideal location—can unlock new possibilities.
Plan for long-term value:
Since the average first-time homebuyer is now 38 years old, many are skipping the traditional starter home and investing in properties they can grow into. Buying a home with extra space and income potential can provide greater financial security over time.
Conclusion
While the starter home market is more competitive than ever, creative strategies like leveraging a jumbo loan and adding rental income can make homeownership more attainable. By staying informed, flexible, and patient, first-time buyers can navigate today’s real estate landscape and secure a home that meets both their current and future needs.
