Buying a home has been part of the American Dream for as long as it has existed. However, for those just starting out in the housing market, it can seem intimidating, and the prices may seem unfeasible. Starting with a fixer-upper is a great way to break into the market and achieve the security that comes with homeownership.
Before you begin, determine the state of your finances. Your overall financial picture will determine what kind of fixer-upper you can get. The first essential thing to know is that fixer uppers are usually around 8 percent lower than market value.
The second factor to consider is that you will need to have 10 to 20 percent of the total home price as a down payment. The larger your down payment, the less interest you will pay over time. Also be sure to check your credit score, as this affects what your interest rate will be on your mortgage.
Where to Begin
Start by looking locally. What fixer-upper properties are available in your area? The closer you are, the easier it will be to make and oversee repairs to your new home. Your first stop in finding those homes is contacting an experienced and dedicated realtor.
If you plan on doing any DIY renovations, you will also need the right power tools. Invest in a good drill, sander, jigsaw, eye protection, gloves, and whatever else you will need. The more you fix yourself, the more you save toward your next big purchase — or for your mortgage.
The best place to begin working on your new home is to fix any safety issues. Remove mold (typically costs $500 to $6,000), address any problems with wiring or the heating system, and replace broken windows and doors. Fix the external features before diving into the internal ones, as you don’t want your work outside to damage what you have already done inside. If you’re doing extensive work, you may need to temporarily put some items in storage.
If you decide to work with contractors, make sure you’re getting multiple estimates for each job. Make extensive use of impartial reviews as well, especially if one contractor lists a price that seems too good to be true. Usually, if a quote seems like too big of a bargain, the job will not be done well. Also, be wary of contractors who claim they can fix all of your home’s issues. Find people who specialize in their given field instead.
Stay or Sell?
Whether you should stay in your fixer-upper or sell it once the work is complete depends on a few factors. First, determine if you love your new home now that it has been fixed. How do you feel about your neighborhood? Does it have everything you’re looking for in the long term, like a good school district or close proximity to your job? Is it big enough for your family?
Even if you want to sell it and move, there are other things to consider. What is your financial situation? How much profit will you make on your renovated home? A local real estate agent will help you understand how much ROI you should expect, and a home value estimator may also be useful in determining whether you can afford to sell or not. The decision comes down to you, but do some research before you make your choice.
Buying your first home should be an exciting experience, and with the right research and preparation, it can be. Whether you’re flipping the house or making it your forever home, a fixer-upper is an excellent way to break into the housing market, especially on a tight budget.
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