Buying a house is a crucial decision, and whether going for a new one or the one that needs a little repair is a vital point to explore.
Many factors need to be considered, such as the size of the house, the location and the number of efforts you are ready to put into it.
You can either move into a residence that requires no work at all or a one where you need to refurbish a room or two to compliment your taste, or you can go for the one that costs cheaper but requires a lot of work from your end.
Here are a few parameters that will prudently help you in choosing the correct option for you.
Fixer-Uppers For The Tight Budgets
If you are buying a house for the first time and are running with a limited budget, this one is the right choice for you. Also, people who wish to develop projects can opt for such properties.
Whatever your reason is, always remember a fixer-upper demands a lot of effort from your end. Moreover, if you have financial limitations, you might need to do a lot of replenishing yourself or will have to renovate room after room as you save. If this does not sound enthralling, then fixer-upper is not an option for you. One good thing about existing homes is that they more often than new homes come with a fence already included which can offset the costs a little bit.
In simpler words, if the idea of renovations captivates you, then go for fixer-uppers and if not, look for fresh construction and off late renovations that come with all the tick boxes checked.
Renovations Go Hand In Hand
There is a good probability that you will be undertaking renovations unless you move into a completely customized residence. Home Information and Data Company Kukun’s CEO Raf Howery states that approximately 60% of newly purchased houses get redone, no matter what living conditions they are bought in.
In a good number of cases, even if a kitchen or a living room feels archaic, you may need to redo the walls, the flooring, remove or add in some cabinets and so on.
If you plan to customize your home your way, you better go for an existing house with a lower price tag so you can spend the remaining amount on the customizations.
Fully Ready to Move In Houses Costs A Ton
Your budget will be a prime factor when you decide what kind of accommodation you ought to buy.
An average existing house costs around $284,600 while a new house costs around $317,900, according to the Federal Reserve Bank of St. Louis. The new houses are built at a higher end of the local market’s rate. The use of cutting-edge systems and materials resulted in the difference of $33,000 between the two.
On the other hand, in the case of fixer-uppers, too, you need to spend extra owing to the aging systems and the possible neglect.
From an insurance perspective, a fixer-upper is more of a liability than a new house. Jason Metzger, Senior Vice President and Head of Risk Management and Service Operations at PURE Group of Insurance Companies, states that they incline more towards houses that are new, built better and are used by responsible people. Older homes can be covered by insurance policies; however, the greater risk factors lead to a higher premium.
Financing is Simpler Without Capitalizing Refurbishment
When you have to remodel a fixer-upper, you will need to finance the repairs and the price of the house.
Many banks offering conventional mortgages will never finalize a loan that exceeds the property’s contemporary value as financing renovations is considered a daredevil move.
However, there are a few mortgage programs by the Federal Government that can make this possible, including-
- U.S Department of Veterans Affairs Renovation Mortgage
- Federal Housing Agency 203(k) Loan
- Fannie Mae HomeStyle Renovation Mortgage
However, such loans come with a specific red tape or an augmented price tag, or both, suggests Lauren Anastasio, a Certified Financial Planner. She further states that such loans come with various restrictions as to the contractor you can hire for the renovations and more. In the case of a private lender, you will pay a surged interest rate.
You may do good with financing your mortgage separated from the renovation costs if you can do the refurbishments without a loan. You can get a separate personal loan when buying the house or get a home equity loan when the renovation builds up enough equity.
Fixer-Uppers Come With A Lot of Planning
Suppose the fixer-upper requires a ton of effort. In that case, you will need to plan the remodeling in advance, figure out your budget for the project, analyze the scope of work and create a timeline.
You’ll have to hire a team that will aid you in getting the renovations done. Moreover, if the remodeling will require heavy construction, a construction insurance policy to shield the property will be needed. In this case, your insurance organization can help you determine the priorities in the rehabilitation process.
Location Might Not Be A Priority
A wide difference between fixer-uppers and new houses is their location. The new houses are generally constructed in the suburban subdivisions. At the same time, you can easily land an upper-fixer nearer to the cities or the city center or in a more established neighborhood.
Your preference decides the vitality of the location. While staying near the city center reduces commuting, if you are looking for larger homes, you need to look in the suburbs.