Today we feature our guest blogger, Bret Engle article.
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Many first-time home buyers consider purchasing a fixer-upper. While you may think a fixer-upper is an inexpensive way into your first home, or a fast track to easy money, it could turn into a money pit. Take these points into consideration so you can make a smart choice.
The home-buying process. Before you do anything else, you need to know the ins and outs of the home-buying process. CNN explains the basic steps:
Save for a down payment. Typically this is around 20 percent of the purchase price.
- Know your credit score. The better your credit rating, the better your chance of getting a loan and securing a good interest rate.
- Talk with your bank. Your lender can tell you how much you can borrow.
- Explore the market. Find out what’s available in your price range.
Special funding. Depending on your situation, you may qualify for special loans to buy a fixer-upper. There are government-backed home-renovation loans available through Fannie Mae and the Federal Housing Administration. These loans are determined in part by your credit rating, along with other factors affecting eligibility.
House hunting. You need to research the homes available in your area, becoming familiar with all the local market offers. You should explore what is in your price range, decide if you can afford repairs, and think about whether it’s appropriate to invest your time, money, and energy in a fixer-upper. For instance, homes for sale in Stamford, CT have a median listing price of $570,000.
As Bob Vila explains, if you’re pooling all your funds for a down payment, it may not be reasonable to consider a home you can’t afford to fix right away. Some repairs are cosmetic, and you can live on-site and do the work yourself. In that case, you can probably take your time and make repairs during evenings and weekends. If a house has structural issues or needs major renovations, consider where you will live and whether you have the skills to do the work. When determining repairs, some items may be difficult for a layperson to evaluate. Before you fall in love with property, some experts note it’s wise to pay for appropriate inspections, which may mean hiring more than the traditional certified home inspector. There are specialized inspections for roofs, sewers, pests, and geological issues, and you might even be able to get the seller to pay for them.
Smart decisions. If you elect to take the jump into purchasing a fixer-upper home, you’ll need to invest in appropriate tools and materials. You won’t want to pinch pennies by buying poor-quality items because good tools such as drills, sanders, and jigsaws make your work much easier. Better quality equates to better efficiency and a lighter workload on your part. You also need to prioritize properly. For instance, HGTV notes you want to make any major repairs to kitchens and bathrooms first because those rooms are of high use and value.
Sell or stay? This is a big question, and there are many determining factors. One of the biggest factors in whether to flip your fixer-upper is the expense involved in your renovations. If quick, cosmetic repairs are all that’s needed and a home is located in a desirable location, you can potentially turn a profit flipping a home. However, expensive repairs, a downturn in the market, or a location that isn’t so marketable can all factor into whether your investment will pay off. Some professionals warn that for many first-time home buyers who purchase fixer-uppers, bankruptcy can be the outcome instead of a tidy profit. Weigh the pros and cons carefully before your dream of flipping a fixer-upper becomes a financial nightmare!
First-time fixer-upper? If you’re puzzling over whether to purchase a fixer-upper as your first home, it’s wise to be cautious. Understand the buying process and evaluate whether you have the skills and money to make it worthwhile. Weigh the many factors involved if you’re considering attempting to flip the property. Careful considerations are the key to making a smart decision!
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