The Do’s and Don’ts For Purchasing and Renovating Your First Home
Most first time home buyers never consider purchasing their first home and also renovating it. They think that it will take years for them to get their home exactly the way that they want it. That is not true. Any qualified first time home buyer can get a renovation loan with as little as 3% down and can purchase their new home and start renovations immediately after closing. The improvements are done in weeks and not years!
Here are the Do’s and Don’ts to consider when buying and renovating your first home:
The Do’s
Do get educated on your real estate market as soon as possible. Take advantage of the all of the free online tools that are available now on the Internet. Sites like Zillow.com, Frontdoor, Trulia and even Google (see Google’s new real estate search tools), can offer information at the local level. These are great site to begin the home locating process. Do not be afraid to ask questions of your lender, agent and builder about anything that you are uncertain or unclear about.
Do get pre-approved for your renovation loan. Determining how much you qualify for is the most important part of the home buying process. You need to know how much money you will need to have for a down payment and closing costs, what is the amount of a house payment you are comfortable and make sure that there is nothing on your credit that may impact your ability to get a loan or effect your interest rate. Working with a lender that specializes in renovation loans, they will provide you with invaluable insight and will be able to help you through the entire process from pre-qualification to the time you unpack your last moving box.
Do find your “A-team” before you make any offers. Besides having an experienced lender, you will need to have a Realtor and contractor that understand the unique process renovation.
Do look for a “diamond in the rough.” The best opportunities are the ones that everyone has passed on. Start looking passed the peeling paint and shag carpet. Start looking at what it could be.
Do your legwork in advance of making any offers. Because the value of the home is going to be based upon all of the improvements that WILL be made to the home, you need to have a good idea of what the neighborhoods you are considering are selling for. For example, say you plan make an offer of $135,000, and the costs of theimprovements you want to do are $30,000, the home will have to appraise for a minimum of $165,000. But, if the neighborhood is only supporting values of $135,000 or so, the lender’s appraiser will not be able to justify the higher value. The lender and the agent will be able to provide you with the data to make sure that you are not overbuilding for the neighborhood (This is where the online tools will help). You will also need to make sure that the contractor can do the work that you want within your budget.
Do nail down your renovation goals before you make an offer. After you have found your dream home, you will need to determine what items can be renovated and what will fit into your budget. Be prepared to delay the major renovation of the kitchen when it only needs new flooring and appliances. The granite counter tops may have to wait until the next house. Be realistic with your goals and your budget.
Do plan for potential problems. Even the best laid plans often go off course. Be prepared for changes to be made once you have closed on your new home and you have started the renovation process. Have most of your decisions made before you close that way you can hit the ground running and you won’t get slowed up after the renovations have begun. A good contractor and a well-thought out plan usually will take most of the unknowns out of the equation.
The Dont’s
Don’t stretch for more house than you can afford. Life will throw you a curve ball. Kids, career changes and even family dynamics all can play a part in your future. Make sure that you are buying a home that you can comfortably afford even when you get the curve ball thrown at you.
Don’t overbuild for the neighborhood. You may want $25,000 custom built cabinets in your kitchen, but is that really a smart idea for your first home? Most likely not. Do make improvements to your new home that will give you the most value for the buck. Items like flooring, cabinets, windows and doors and paint are all items that will increase your home’s value and not ….
Don’t think of your home as a “get rich scheme.” In 2008, the era of buy and flip is over. There are countless stories of people out there that had the same idea and now are paying for it. They bought homes that they couldn’t afford with the hopes of quickly reselling and today there are no buyers. Many of these home maybe the homes you are looking at. You should think of your home as a comfortable place for you family to create dreams and to make memories not a late night infomercial product.
Today’s is a great time to take advantage of the amazing real estate deals that are now out there. Follow our Do’s and Dont’s and you will have a successful and stress-free home buying and renovating experience.
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