Have you ever considered buying a fixer-upper and wondered about its benefits or what fixer-upper mortgage options look like?
There are some major differences when it comes to buying a fixer-upper versus a move-in-ready home. A home that could use a little extra work could be affordable for buyers on a budget. However, there are a few things to consider before you purchase a fixer-upper home.
Currently, Seattle sits at number 3 among the hottest housing markets in the U.S. This means buyers searching in the home of the Space Needle are under much more pressure than in years past to find a home that fits their needs.
Some buyers are fortunate enough to afford substantial down payments in the booming housing market. But for those who aren’t concerned about purchasing the latest and greatest house model, fixer-upper homes can be an option.
You Could Get More for Your Money in the Long Run
You’re not alone in your want for a home that you could buy to renovate. According to a survey from Realtor.com, “60% of home shoppers said they were open to a house that needs renovations.”
By opening yourself up to buying a fixer-upper home, you’re more likely to find homes within a reasonable budget. Due to the amount of work done, age of the home, or overall condition, a sale might be in sight.
There could be some tax benefits to buying a fixer-upper home as well. For example, you may owe fewer property taxes because of the lower price of the home. You may even have additional saving opportunities if you improve the property’s value over time with renovations.
Then, you’d likely see your home appreciate over time. Whenever you decide to sell your home, it will be worth a good amount more than when you bought it.
There’s More Flexibility When Renovating Your Own Home
Unlike a new home built for a general buyer, you can decide exactly what you’d like to see in your home. That could mean replacing old linoleum floors with gorgeous hardwood. Or tearing down an entire bathroom to rebuild it into a marble sanctuary. The decisions are your own.
Today, there are many unique features, including energy-efficient additions that can add value to your home. Plus, they can add a level of comfort and luxury that you may not be able to find elsewhere.
Some of the best energy-efficient home improvements include items like:
- Installation of energy-efficient appliances
- Refreshed insulation throughout the home
- A digital thermostat that allows you to set timers or limits on the temperature
- An improved water system
- Ceiling fans to save on AC that still look and feel like your style
- Improved opportunities for natural light through additional windows
- Replace lighting fixtures with energy-saving bulbs
- Better sealant around doors and windows
The Realities of Home Renovations
Turning a fixer-upper into a home that you love with added features and improvements could get you a great return on your investment in the future. However, it’s important to start by lowering your expectations of what the house flipping process actually looks like.
For starters, ignore what you see online and on hit renovation shows. Turning a house into a model home can take a lot longer than you might think. Most people need to hire one or multiple contractors, designers, architects, builders, and other professionals in between to help make adjustments. But first you’ll need to secure your ability to do home renovations with a fixer-upper mortgage option in the form of a loan.
Major renovations for a home today cost anywhere from $11,000 to $60,000 or more. It’s understandable why planning is necessary when purchasing a home that requires additional work. The good news is that there are fixer-upper mortgage options for those who need some financial assistance.
[Related: How to Finance a Home Remodel]
Fixer-Upper Financing Options
Part of Freddie Mac’s selection of loan programs, CHOICERenovation is a single home loan that funds fixer-upper homes. This could mean that you only need to put as little as 3% down to secure your home. It can also be used for an additional or investment property, which can be a fantastic way to earn additional income in the future.
FHA 203(k) Loan
This type of loan can help pay for the cost of the home and any improvements it may need. An FHA 203(k) loan could be an option for someone who has a low credit score of at least 500. You may only need to put down 3.5%. However, the minimum requirement is 10% for credit scores between 500 and 579.
HomeStyle® Renovation Loan
Fannie Mae supports a Homestyle® renovation loan if you plan on buying a home that needs some work. It can offer additional incentives if you decide to incorporate energy-saving upgrades. This type of financing can even potentially fund landscaping and luxury renovation projects.
VA Home Renovation Loan
You may need a higher credit score for a VA renovation loan, and you must be a veteran or service member to receive it. This can be an ideal option for someone who qualifies as it requires no down payment. Additionally, you’ll see lower costs for a home that needs renovations. It’s definitely worth looking into if you feel you are a good fit, as it can help save you money.
Find a Professional to Help Through Seattle Mortgage Planners
We’ll work with you to understand your financial options, go over your choices for a loan, and help you through the application process. Our team of professionals are trained to help you find what you need based on your situation. It may not be simple, but we’ll be here to work with you whenever you’re ready to help put your mind at ease.