Purchasing a home is one of the most important investments you will make in life and should be one that is carefully planned out. When setting out on the journey to homeownership, one of the biggest choices you will be faced with is deciding if you want to purchase a home that is turn key ready or if you want to purchase a home that needs some tender loving care. Buying a fixer-upper home comes with its perks - giving you the ability to customize it to fit your needs, but you should to insure you have adequate funds to take on the renovation project before you make the commitment.
Before purchasing a fixer-upper, determine if you have the time and appropriate skills to do the work yourself, or if you will need to contract some or all of the work out to professionals. Whether you plan to do small upgrades to your new home or take on a full-scale remodel, now is the time to start planning ahead to figure out the potential costs, and how the project will be funded.
Research the Renovation Costs Before You Buy
The costs of renovating a fixer-upper can add up quickly, especially when you will likely not find out what is buried behind the walls and under the floorboards until you dig in to do the work - even with a thorough home inspection. You could be faced with wood rot, old wiring, and broken pipes that need to be repaired and were not considered as part of the original renovation plan. Before you sign on the dotted line and commit to purchasing a home that needs a facelift, be sure to do your research and learn about the real costs of construction and remodeling projects. You may not know what the exact extent of the work will be to fix up the home you end up purchasing until you figure out which home you want to buy, but you can start crunching numbers now and work up an estimate based on what you wish to do to your home.
Purchase Under Your Pre-qualified Budget
Before you purchase a home, you should get pre-qualified for a mortgage through your broker. The pre-qualification letter outlines how much money you will be approved to borrow, provided none of your financial circumstances change between pre-qualification and actual signing of your mortgage documents. One costly mistake that some new homeowner hopefuls make is to purchase a home that is valued up to their borrowing limits without taking into consideration that they will need to have money to pay for renovations. Search for a home that is priced well below your borrowing limits and then work with your mortgage broker to see if you can get extra money built in to the loan to pay for renovations and upgrades.
It is always a good idea to have a healthy reserve of cash saved up in your bank account when you make the decision to purchase a home. Even if you are purchasing a home that is move in ready, there is always the potential for an emergency to happen and you do not want such emergencies to put you in undue hardship. Having extra cash in savings will also better prepare you to take care of unplanned expenses that could come up during your home renovation project.
Determine Your Needs Vs Your Wants
Purchasing a home is an exciting experience that can send your mind into creative overdrive dreaming up ways to turn it into your own personal oasis. Before starting your renovation project, come up with a detailed project list that includes estimated prices for each project. Once you have finished the list and have added up all of the costs, you could come to the realization that your budget will not cover every project you want to do - at least all at the present time. Be prepared to make decisions about projects that need to be completed versus projects you want to do, but that will need to be "back burnered" for the time being.
A fixer-upper can be a good value and a wise investment for your future, but only if you are financial able to complete the necessary repairs and remodeling projects that will make it feel like a home. Before making the decision to purchase your fixer-upper home, be sure to have the appropriate amount of savings to cover unexpected expenses, and work with your mortgage broker to see what lending options are available to fund the project.