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According to a TD Bank survey of first-time homebuyers in 2021, 71 % aren’t looking for a dream home but they’re shopping for a starter home or fixer-upper.
Older homes can be a good compromise for buyers resulting from the lack of inventory and rocketing prices.
Buying a fixer-upper is taking on a project of uncertainty.
Scott Linder the national sales director at TD Bank Mortgage spoke to Bankrate and gave a few clarifications about fixer upper trend.
The driving force of the interest in fixer-uppers
The National Association of Realtors notes rises in prices by 23.6 % from May last year to this year.
This low inventory has been an issue since the housing bubble of 2008. There haven’t been any addition of inventory.
Loans available for renovation
Many lenders have an FHA 203 (K) loan that allows people to buy a fixer-upper.
A home equity loan is another option if you already own the home.
Many home equity loans go up to a 90 % loan-to-value ratio. And a cash-out refinance is a possibility with the low-interest rates today, if you haven’t already refinanced in the last year and a half.
If a first time home buyer is considering fixer-upper
The most important is to be part of the inspection process. Buyers should take it seriously.
And hang around while the inspector makes his rounds. And learn about the property.
If you can do the major part of the work yourself, then you can save a lot of money.
Be cognizant of cost overruns. As the raw material cost like lumber prices have gone up, so buyers should be prepared for cost increases.
Mistake made by buyers of fixer-uppers
Underestimating the cost of your renovation is the biggest and most hurtful mistake, says Linder, because there are always surprises. It is better to anticipate that there are going to be cost overruns of 15 to 20 %.
Reference Source: MSN
