Thinking of buying a fixer-upper?

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Here are some things to consider before taking on a project:

1. Be realistic about what you're willing to take on.

There are degrees of renovation or remodeling when we are talking about fixing up a home. A minor fixer-upper can be tackled with cosmetic projects—like pulling up carpet or laying down tile. A major project might have some serious structural issues caused by earthquakes, termites, or water. Many older homes may need to be rewired, re-plumbed or even gutted. The magnitude of the project you’re willing to take on will set the tone for your house hunting.

2. Think about your budget.

If you’re ready to take this project on, be realistic about how much money you must set aside for renovations after the down payment, and prepare to blow it. You will go over, so give yourself a little extra breathing room. You also should include costs like your rent for living off-site while the work is going on. Some mortgages include this, so be sure to ask your lender.

3. Financing your fixer.

There are different types of renovation loans:

  • Federal Housing Administration's FHA 203(k) renovation loan. This may require the use of a HUD consultant, but lower credit scores and lower down payments are allowed.

  • Fannie Mae’s HomeStyle Renovation Loan. This requires higher credit scores than the FHA, but luxury items, like pools are eligible.

  • Freddy Mac's CHOICERenovation loan.This mortgage allows repairs that help in case of natural disasters, and that's important in our earthquake-prone location.

  • A VA renovation loan. The Department of Veterans Affairs recently updated its VA loan guidelines to include the purchase and renovation of a home. A VA-approved contractor is required, but veterans are generally good at navigating the extra requirements of almost any project.

4. Hire the right team.

Interview your contractors, because you're going to be working with them for a while. We advise to always work with people with whom you make a real connection. You also want to be sure that if a problem comes to light that wasn't found during the inspection that your hammer-wielders can handle it. This is usually not the lowest bidder.

5. Have fun!

Clearly, if you are someone considering buying a fixer-upper, you like a little adventure. Keep in mind that this can be a bit of an emotional roller-coaster, but once it's done, it's YOUR house. Unique and perfectly designed for you. Good luck!

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