Buying a Fixer-Upper 

by Sandy Dodge

The exterior of a fixer-upper house with deteriorating white siding. The paint is chipped, the roof shows signs of damage, and the window shutters are cracked and uneven.

For some home buyers, a fixer-upper is their idea of a dream home. However, the process of buying a fixer-upper comes with additional responsibilities compared to properties in better condition or new construction homes. Preparing for the process comes down to creating a remodeling plan, knowing what to look for when searching for listings, and understanding what financing options are available.

Searching For a Fixer-Upper

  • Location: Whether you are purchasing a fixer-upper with plans to sell it, rent it out, or live in it, consider its location before purchasing. If you’re planning on selling or renting, location is one of the most important factors in making a return on your investment. And if you’re planning to live in your fixer-upper, keep in mind that location will be a large part of your experience in the home. If you’re looking to sell eventually, talk to your agent to identify high ROI remodeling projects that will pique buyer interest in your area.
  • Scope of Renovation: If you are looking for a smaller scale renovation, look for listings that require cosmetic projects like new interior and exterior paint, fresh carpeting and flooring, appliance upgrades, and basic landscaping maintenance. More expensive and involved projects include re-roofing, replacing plumbing and sewer lines, replacing HVAC systems, and full-scale room remodels.
  • Inspections: Beyond a standard home inspection, which covers components of the home like its plumbing and foundation, consider specialized inspections for pests, roof certifications, and engineering reports. This will help differentiate between the property’s minor flaws and critical problems, further informing your decision when it comes time to prepare an offer.
The interior of a fixer-upper house with ripped out kitchen cabinets, drywall, and flooring. The kitchen is being completely gutted and remodeled.

Financing Options

You’ll be looking at different types of mortgages when buying a fixer-upper, but keep in mind that renovation loans specifically allow buyers to finance the home and the improvements to the property together. Extra consultations, inspections, and appraisals are often required in the loan process, but they help guide the work and resulting home value. Talk with your lender about which option is best for you.

  • FHA 203(k): The Federal Housing Administration’s (FHA) 203(k) loans can be used for most projects in the process of fixing up a home. In comparison to conventional mortgages, they may accept lower incomes and credit scores for qualified borrowers. 
  • VA renovation loan: With this loan, the home improvement costs are combined into the loan amount for the home purchase. Contractors employed in any renovations must be VA-approved and appraisers involved in the appraisal process must be VA-certified.
  • HomeStyle Loan – Fannie Mae: The HomeStyle Renovation Loan can be used by buyers purchasing a fixer-upper, or by homeowners refinancing their homes to cover the improvements. This loan also allows for luxury projects, such as pools and landscaping.
  • CHOICERenovation Loan – Freddie Mac: This renovation mortgage is guaranteed through Freddie Mac, allowing projects that bolster a home’s ability to withstand natural disasters or repair damage caused by a past disaster. 

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