Many people have the goal of buying a home that needs work, fixing it up to be their dream home and being the idols of their friends and family. While this sounds like a dream come true, there are many things you should know about buying fixer-uppers before you let your dreams take over your reality.
Get a Solid Inspection
It is one thing to purchase a home that you do not like the décor of or you cannot stand the flooring, wall color, or where a certain wall is positioned. It is quite another to purchase a home that has termite infestation, mold problems, or lead-based paint. You want to steer clear of purchasing a home that has potential health hazards as that could leave you in more trouble than you bargained for in the first place. Find a reputable inspector in the area and let him do his job on the home before you make any decisions.
Know the Restrictions
Typically, there are not a lot of restrictions on fixer-uppers, but if the home is located in a historic district you could find yourself in quite a predicament. These homes require special permits and have more restrictions on them regarding what you can and cannot do. Before you sign on the dotted line, determine if you will be able to make the changes that you desire or if you will be stuck with the ancient décor of the home that you planned on gutting and making your own.
What can you Do?
We all fall into the trap of thinking we can do whatever we see on television. With the numerous DIY shows on TV today, we are constantly coming up with new ideas. Before you think about buying a fixer-upper though, truly think of the reality of what you can do. This does not just mean what you are physically capable of handling, but what your time constraints allow. Don’t forget you probably still have to work, take care of your family, and take care of daily living tasks in addition to fixing up the home. Sometimes it is worth the extra money to pay someone to do it just for the convenience.
What is your Budget?
Your budget obviously plays an integral role when you think of buying fixer-uppers. You should sit down and figure out your budget first before you start getting quotes. This way when you do get quotes and ideas come flying past you, it will be easier to discern between what you can and cannot afford without getting emotionally attached to a specific idea. Staying realistic throughout the entire process is the only way to truly get what you want out of your home.
Hire a Structural Engineer for Structural Changes
Does the home you want to purchase need structural changes in order to make it what you envisioned? If so, it is best to hire a structural engineer to look at the ideas and determine if they are plausible for the home you wish to purchase. Sometimes your ideas look good on paper, when in reality they will end up costing you much more money than anticipated, causing you further problems down the road.
Get Pre-Approved for Buying Fixer-Uppers
Financing is sometimes a little harder to come by when you are considering buying fixer-uppers. There are numerous options available, including home equity loans, FHA 203K loans, and the Fannie Mae Homestyle Renovation loan, but you should know what they will cost and if you qualify ahead of time. Each loan program has its own requirements for which you might or might not get approved, so knowing ahead of time what you can obtain will help you make the right decision.
Even after you decide on the perfect fixer-upper, make sure you have enough contingencies in the contract in the event that something like the inspection or financing falls through. Buying fixer-uppers is more complicated than purchasing a home that is ready to move into, so having plenty of ways out of the contract without losing your earnest money will help to save you from financial destruction in the long run. If it all works out in the end, you will have your dream home designed just the way you always imagined, but you have to do the work to accomplish it first!
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.