I want to buy an ugly house. We hear this from a lot of first time home buyers. It’s generally an approach for people that want to be in a particular neighborhood, but are constrained by price. So they look for an ugly house so they can get a better deal and do repairs after closing. This can be a fantastic idea as long as you know what you’re getting into.
What do I need to know? Even if you’re a contractor or just very handy, banks generally won’t lend money against a house that has structural issues. Because of this, first time home buyers may want to narrow their search to only include properties that need cosmetic repairs as opposed to structural repairs. If you’re considering a rehab loan, they have a lot of other caveats so we’ll save that discussion for another blog.
So I’ll just target cosmetic fixers then. Hold on now, it also depends on what type of financing you’re using. FHA can be a great option for first time home buyers. However, they are often more stringent in regards to property condition than conventional loans. So if you’re using an FHA loan, you could be excluded from buying cosmetic fixers with minor issues like pealing paint, or even a broken window pain. This is why it’s imperative to align yourself with a real estate professional that understands the different types of financing guidelines.
If the bank won’t loan me the money, then I’ll just find another house. It’s usually true that if the bank won’t give you a loan (depending on how the contract’s written), you can exit the contract and retrieve your earnest money. However, there are some upfront costs involved like paying for a home inspection and ordering the appraisal, that have to be paid regardless of whether or not the loan closes. This amount is generally some where between $1200-1500! You don’t want to have to pay this money up front unless you’re pretty confident you can get the loan.
Don’t make the biggest financial decision of your life without getting educated! If you’d like more information on buying a fixer, or the home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.