Should you buy a fixer house?

Is the house in fair condition a good bet? Here are some things to consider if the affordable home you’re eyeing needs some work.

The first thing to consider when buying a home is location. Location, location location is the credence held by most real estate experts. The reality of the market; true fixer homes are far and few and generally are not lendable. For this post we will be focusing on homes that are bankable and need a little TLC. There is virtually no inventory of distressed homes anymore. This is result of more exuberant housing economy. These potential repairs may be indicative of a good value for your money:

  • landscaping
  • new roof
  • new appliances
  • new paint
  • updating the interior

Buying tip 1: Don’t be automatically turned off by the home because it needs some attention especially if it is affordable and is in the area in which you want to live.

Price Vs Cost Of Repairs

Making a low ball offer on a house because it needs a new roof for example might not be the best approach as the market might otherwise support the list price even more so if there are other interested parties. All homes ultimately will need a new roof at some point anyway. It is one of many ulterior costs you will incur as a homeowner over the longer term.

Buying tip 2: Make list of the repairs that can you and cannot live with.

How bad are the repairs? Say the roof has an economic life of five more years. The price of the home is very affordable and the front yard needs a bit more upkeep. Look beyond the cosmetic repairs. Is the home quiet? Does it have a big yard? What’s the neighborhood like? How’s the school district? Can you live in the property and make the repairs over time as your finances allow and permit?  If the answer is no, it would probably be best to not buy that home, as you probably would be biting off more then you could chew. However, if you can make the repairs over time and the property is safe and inhabitable, in many situations the house may be worthwhile.

Construction Loans

Not as popular as they were pre-housing crisis, these loans allow you to finance the repairs of the property so long as you have the financial capability of supporting loan amount to buy the property as well as debt servicing the improvement costs. These loans also contain tighter credit requirements i.e. higher credit scores and typically require down payments of at least 20%.

Less Down

If the cost of the repairs of the property can be cash financed, you usually have the option of buying the house with less money down. Let’s say you’re buying a home with a $50,000 down payment. The house needs repairs totaling $20,000. Instead of buying the home using $50,000, you use $30,000 ($20,000 going to improvements). The difference in the mortgage payment would be to the tune of $100 per month. The market both in both housing prices and interest rates will continue to evolve, changing your equity position creating opportunities to re-structure your home mortgage. You may have the option to refinance to lower your payment or cash out your equity to replenish your cash that was originally used to repair the house.

Buying tip 3: Avoid buying a home with the automatic expectation of being able to refinance in the future. Refinancing in the future should be an “elective” decision.

If the idea of buying a home for hundreds of thousands of dollars and making repairs over time does not sit well with you, buying house might not be in your best financial interest as houses can be money pits, often times resale homes over 25 years old fit this category. This is precisely why you should work with a sharp real estate agent and loan professional to sandwich your efforts in determining if the house that needs some work really might make sense after all.

Looking to pre-approved to buy a home? Start with a free rate quote online today!

 

 

RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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