Want a Fixer Upper? This Mortgage Is for You

Want a Fixer Upper? This Mortgage Is for You

It takes a special person to see the potential in a home that’s in need of serious rehab. If you’ve got your heart set on buying a dream fixer-upper — but don’t have the savings to cover both a down payment and a renovation — there are loan products out there that could help you make your dream a reality.

Consider a loan with a built-in reserve

The Federal Housing Administration (FHA) 203(k) rehabilitation loan or Fannie Mae HomeStyle Renovation Mortgage could be good financing options for buyers seeking fixer-uppers. These loans allow you to purchase the home with a reserve that’s put in escrow to fund renovations.

One caveat: There are strict guidelines, and it’s important to understand how these loans work if you’re considering a handyman special.

“These are good for people who can afford the mortgage payment, but they don’t have a lot of cash on hand to be able to pay for these renovations outright,” says Cara Ameer, broker associate and real estate agent at Coldwell Banker Vanguard Realty based in Ponte Vedra Beach, FL. “If the scope of the renovation is big and it’s a total overhaul costing six figures, you probably should do some kind of renovation loan.”

First-time homebuyers with limited budgets who want to live in a particular area can usually benefit from buying a less expensive home that’s a fixer-upper — and these loans make it feasible. (mehr …)