Renovation Rules for Homebuyers
Three Renovation Rules for Homebuyers
by HomeFinder.com On April 30, 2015
After weeks and weeks of searching for a home, nothing beats finding “the one.” No home is perfect, though, and you’re probably already envisioning a few renovations to put your personal stamp on the place. It’s easy to get caught up in the excitement of buying a house and forget some budgeting basics. Follow these three rules to ensure your new house will be comfortable and affordable.
A homeowner takes a break from painting his kitchen
1) Adjust your offer based on the anticipated cost of renovations
If you don’t know how much it will cost to make the changes you want, you can’t be sure that you will be able to afford to pay for them after you buy the home. It may not be possible to get actual quotes from contractors before you own the house, but you can do your research. Many home renovation websites, such as this one, include average cost estimates for popular projects. Just be sure that your expectations are in line with their project parameters. If the estimate you’re using assumes laminate floors or countertops for a kitchen renovation and you have your heart set on ceramic tile and granite, you may not be getting an accurate picture of your potential costs. You can also talk to a knowledgeable associate at your local home improvement store for a ballpark estimate.
Once you have the estimated costs of the renovations in hand, use them to adjust your offer. It’s unlikely that the current homeowner will concede the entire cost of renovations when considering your offer, but knowing in advance will help you determine the maximum amount you’d be willing to pay for the home.
2) Designate specific funds to pay for renovations
Be sure you know how you will pay for the renovations once the home is yours. You may be able to make a smaller down payment, allowing you to hold on to some of your available cash to use for renovations. If you have enough equity in the home, you may be able to open a line of credit that allows you to pay for improvements as needed, but be sure that you can make the payments. A line of credit is effectively a second mortgage, so missing payments impacts your credit score and could result in foreclosure.
You may also qualify for an FHA 203(K) mortgage, which will cover the cost of renovations if the property meets the required conditions. As with any loan decision, it’s always a good idea to consult with a licensed financial professional; they can guide you to the best course of action for your unique situation.
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3) Prioritize your improvements based on how long you plan to live in the home
Prioritize your renovation list based on how long you plan to stay in the home. If it’s your “forever” home, you can splurge on whatever makes you happy and comfortable. If you plan to stay only a few years, focus on renovations that will make the home more appealing to future buyers. Changes like improving a dated kitchen or bathroom may add more value than installing an in-ground pool, for example. Talk to your real estate agent to understand which features are in top-demand in your neighborhood.
Before you make an offer on a home, keep these rules in mind. If you do, you will not only get a home you can afford, but you will also have a solid plan for making it truly yours.