In today’s market, upgraded homes can be out of reach for some buyers, and a little elbow grease yields a lot of equity. If your resolutions include homeownership, saving money and a little DIY, here are five benefits of buying a fixer-upper.
Lower price tag
Fixer-uppers are a golden ticket for budget conscious home seekers, as properties that need a little TLC are usually priced accordingly. Plus, a slightly lower price range may yield more opportunities to break into that target neighborhood. Before purchasing, gather quotes from a few different contractors to understand what renovations costs could total.
When purchasing a fixer-upper, consider renovation loans like the Fannie Mae HomeStyleⓇ loan or the FHA 203(k) renovation mortgage. Both programs allow you to borrow based on the improved value of the home, so you’ll roll more in your loan and pay less out-of-pocket for renovations. Programs vary in qualifying FICO scores, debt-to-income ratios and down payment amounts. Do some research and speak with a professional mortgage broker to determine which loan may be right for your renovation needs and to learn about the required renovation verification process.
Renovating a home shortly after purchase may fast track an increase in equity. Think of your home equity as “forced savings” in which you are building up the value of your home over time. When you decide to sell, if you still have equity, you would get that equity back as cash. Homeowners generally have found the greatest return on investment with updated kitchens and bathrooms, increased curb appeal and additional square footage.
With just a few renovations, your property could go from fixer-upper to dream home. Whether hiring a professional or doing a little DIY, you’ll have control over materials, layout, colors and contractors. You’ll have the freedom to make your house yours, instead of living with someone else’s tastes.
You’ll also have the luxury of defining your own timeline. You could opt to renovate entirely before the move in date, avoiding the hassle and mess of living in a renovation. You could also save even further and renovate slowly over time*, budgeting as you earn and tackling projects one by one. Either way, you’ll have the freedom to set your own pace and truly build out your dream home.
Fixer-upper or new build, contact a local loan originator in the Motto Mortgage network who can help make your dream of homeownership a reality.
*Certain loan types have a mandatory timeline for completion.