Buying a Fixer-Upper: 5 Things You Should Consider Before Signing Up for a Potential Disaster
Buying a fixer-upper is one way to get into a dream house that fits your price range. From calculating monthly payments, comparing interest rates, assessing a home’s value, and contracting professional services, there is a lot to consider before taking on a fixer-upper.
Shortcut to Homeownership
Not all homebuyers can cope with high prices, limited inventory, lender requirements for a credit score, or save enough for a down payment. Fixer-uppers are priced at a discount to make up for needed improvements and can qualify for home loans with relaxed downpayment and credit score requirements. Not every fixer-upper can be lived in while undergoing renovations, which means it could take weeks or months before it is move-in ready. Buy a fixer-upper that matches your skills and budget. Work with a contractor to get an estimate of all the work that needs to be done before making a purchase offer.
Location, Location, Location
The Golden Rule of real estate is a location first. Finding a great deal on a dilapidated home is a smart buy if the surrounding area will add to the future value of the property. Pay attention to neighborhood amenities, crime statistics, local property values, and proximity to noise pollution. Think about the neighborhood and whether or not your planned renovations will fit the area. A real estate agent can estimate the After Renovation Value (AVR) for the area to determine if renovations will result in a return on investment.
Get the Right Inspection
It’s a good idea to bring a trustworthy home inspector along before making an offer. They can spot any flaws or critical issues that can become problematic. Have the overall structure of the home, crawlspaces, insulation, and the foundation inspected. Cosmetic fixes aside, inspect the major components of the home to see where the budget will need to go. Major components include electrical, plumbing and sewer systems, the roof, foundation, bathrooms and kitchen, driveway, decks or steps, and air conditioning and heating (HVAC) systems.
A home inspector may conduct a thermal imaging inspection to look for any potential areas where heat loss and air leakage, insufficient insulation, moisture damage, and abnormal electrical components. Inefficient doors and windows can be replaced at a reasonable rate with Lifetime Aluminum. They have been the first choice among homeowners for reliable window and door installation service in East Hanover, NJ for over 60 years. Lifetime Aluminum specializes in quality vinyl replacement windows, custom wood windows, and custom refinished fiberglass or steel entry doors that fit every homeowner’s taste and budget.
Money Doesn’t Grow On Trees
Buying the right fixer-upper depends on how you plan to finance the renovations. A conventional mortgage loan may put a low ceiling on the renovation budget, limiting things to one project at a time. Renovations will be paid by cash, credit card, or personal loan. A renovation loan could increase the overall budget, making it possible to complete multiple projects at once. Foreclosure fixer-uppers come with delays during the mortgage offer stage, which can delay the start of renovations to an already time-consuming project.
Navigating the mortgage process is a critical step when buying your first home. St. Mary’s Credit Union offers a range of home mortgage programs to suit the needs of every first-time homebuyer. Their lending experts can answer all your mortgage 101 questions about fixed-rate mortgages, adjustable-rate mortgages, and first-time homebuyer mortgages. Borrowers can explore mortgage options, find the lowest rate on the right loan type, and calculate comfortable monthly mortgage payment with a lending expert. Use this APR calculator to find out how much you will end up paying for your mortgage.
Good Bones Matter
Structural renovations like a cracked foundation or replacing the roof get expensive quickly. Find a house with an appealing layout with comfortable space and optimized living flow. Walls can be removed and put up, but changing the layout could require added costs like moving plumbing and electricity. A home that requires mostly cosmetic fixes like paint, drywall repairs, and floor refinishing will save on the renovation budget. This will leave room for lucrative improvements like updating the kitchen and bathrooms, installing new light fixtures, windows, and siding.
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Taking on a fixer-upper can be a rewarding investment for a patient homebuyer with a DIY spirit.
