Is Buying a Fixer-Upper House Worth It?
5 questions to help you decide whether you should buy a house that needs renovation.
There are many paths to homeownership, including buying a fixer-upper, a house in need of renovations or repairs. Many TV shows have revealed the home-flipping process as a viable option for some, but it’s not a solution for everyone. Here are five questions to help you decide if buying a fixer-upper house is a good move for you.
Is it in an ideal location for you?
A lousy house in a desirable location could make a fixer-upper worthwhile — like when it allows you to get into a neighborhood or school district you want. In a hot market, it might be the only way to get what you want. Plus, a house in need of renovation could allow you to buy in an area that might otherwise be outside of your price range.
Is the house livable?
Renovations are messy, loud and often frustrating. Living in a house undergoing major work can make the process much more stressful. Are you prepared for the hassle of living in a house that’s also a worksite? If the house isn’t livable, do you have an affordable place to stay until it’s move-in ready?
Will your budget cover necessary renovations?
While the purchase price of a fixer-upper will be less, you still need to plan for the added cost of any repairs or renovations. After you have the house inspected, talk to contractors to get estimates for the work. If you’re doing the work yourself, estimate costs for materials, as well as any permits that may be required.
In some cases, you can do the work in phases and spread out the cost over time. For example, a new roof could be in phase one and things like new floors could happen during phase two, which you might pay for with a personal loan.
As is true with any house, it’s wise to be prepared for surprises that add to the cost or lengthen the timeline while doing renovations.
If you plan to DIY, how are your skills and how full is your schedule?
You’ve probably seen for sale listings that show a home where walls have been knocked out but not finished. Many a home has overwhelmed an owner’s skillset, budget and overall determination.
If you have the ability to DIY home renovations, you can save a lot of money. But realistically, do you have the skills, time and willingness to see the project through to the end? Be honest with yourself. Any answer other than an enthusiastic “yes!” is a good reason to pass on a fixer-upper.
Can you get financing for the home?
An outdated home in otherwise good condition will likely qualify for a conventional home mortgage. Houses in need of major work like structural repairs or those that don’t have functioning electrical, plumbing or HVAC systems require a different class of loans that allow the money to be used for renovations.
Some buyers combine a home loan with a personal loan to finance a fixer-upper in phases as outlined above. While Consumers doesn’t offer this option, some programs such as 203(k) loans, sponsored by the FHA, allow up to $35,000 of the mortgage to be used to repair or upgrade a home.
If transforming a fixer-upper into the house of your dreams is right for you, talk to one of our mortgage loan officers for more information on financing.
Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.