So you’ve fallen in love with a fixer-upper and dream of what it could become one day with a little bit of love and hard work, but you worry that you won’t be able to afford it. You aren’t alone.
Homes.com had the opportunity to partner up with Stephen and David St. Russell of the Renovation Husbands to hear what they had to say about getting into a fixer-upper home and the hoops and hurdles that come with such an investment.
How the Renovation Husbands Got Their Start Working on Fixer-Uppers
The Russells were living in a small apartment in Boston where rent kept rising month after month. With student loans weighing heavy and only one stable income, they needed to get out of that renting nightmare. On the way to lunch with some friends, they happened to pass a home that looked like it was already in the process of being renovated, and a quick search showed that the house was for sale. This information led to an impulse decision that changed their lives. They had an offer that was accepted on the house within 2 weeks, thus beginning their journey to home ownership and a passion for renovation.
How To Begin Financing a House That Needs Serious Work
The condition of the house you are trying to buy will determine what type of financing options are available to you. For Stephen and David’s first home, they used a traditional first time home buyers loan which had a low down payment. For their second home, they used a 203k which has financing for construction costs built in and a low down payment as well, perfect for a fixer upper! The 203k loan has 2 tracks so that you can choose one that best fits the situation you are in.
203K Loan Tracks
The first track for a 203k is for homes with much larger projects in which the amounts you can finance are regulated by your area. The second track, which is the option Stephen and David chose, is for homes that need repairs of $30,000 or less. This option has a lot fewer hurdles to allow work to get done more quickly and allow you to get into the home more quickly. In their personal experience, their house was completely gutted and they knew that it would take a huge upfront cost to get it up to liveable standards. The bank will not typically give out loans for a shell of a house like the one they were buying, so the great thing about a 203k loan is that it allows you to afford those homes that need a complete flip with the understanding that the renovations done will bring it up to code come inspection time.
To learn more about this process from the Renovation Husbands themselves, check out our live interview, “Home Renovations: What You Need to Know to Get Maximum Value.”
Advice for First-Time Home Flippers
Homebuying can be a scary experience with a lot of unexpected bumps along the way and it’s an experience that people are rarely 100% prepared for. For those homes that do need some extra TLC, it can be even more of a challenge. The Renovation Husbands stress the importance of taking that leap of faith because you never know what could happen.
“Just go for it,” David says, “you can figure it out.”
Save as much money as possible in the beginning of the buying process. David advises, if you don’t have a huge down payment, or if you have some cash, save as much of that as possible so that you can plan for the unexpected. “As soon as you get those keys, you really don’t have very much of an idea of what’s going to happen.”
The most valuable step Stephen and David felt that they took was going to a bank. Banks are the gateway to homebuying and will let you know what kind of loans you have, what options you have, and what you would be approved for. You don’t even need to have a home in mind, but having this important conversation will let you know what you are actually able to afford.
David wraps up the interview saying, “You’re probably better off than you think you are.” There are so many resources available to you going into this process that all you need to do is get your foot in the door.
Read Stephen and Davi St. Russell’s entire fixer-upper story right here on our blog or you can check out our list of home improvement, design, and finance articles to get your fixer-upper into tip-top shape.