The first house.
Not the dream house.
What do they all have in common?
They are usually fixer-uppers with a need for repairs.
Buying the Home
The average first house or starter home in 2019 is $215,000 according to The National Association of Realtors. For most this is a lot, however, there are excellent options like FHA, VA, and conventional loans, where you can put a partial payment down. The downpayment can be as low as 0% – 20% depending on the loan type. This low downpayment can come with some caveats such as private mortgage insurance (PMI), higher appraisal standards, a longer closing period, and a less appealing offer to sellers.
Consider these options wisely. I’ve found it extremely helpful to reach out to a mortgage lender directly for assistance. This typically means skipping the banks. This will cut the go-between cost, as a result, can lower the mortgage fees and interest rate they charge you. There are some not so good ones so make sure you shop around or you can reach out to me. We do not sell mortgages but we can refer you to someone who can.
We are Fee-Only firm meaning we are compensated ONLY by our clients and do not recieve commissions or kickbacks when we refer you to another business. This allows us to only refer experts that we trust.
Repairing the Ugly Duckling
There are two camps of people for remodeling a starter home – the Do It Yourself (DIY) crew and the Outsourcers.
Let’s talk about the people closest to my heart, Team DIY. Hopefully, you have a little bit of experience in hammering, painting, and carpentry. If not welcome to the Youtube age, where you can find videos about essentially every problem you would have when remodeling a house. One important thing to note is the people on the videos will make it seem easier than the project actually is – they are experts and you are not. Be ready to take lots of trips to Home Depot for equipment and to buy supplies. DIY allows you to put in sweat equity (your time), in return, you may save money.
If DIY sounds too scary, then having a third party do the repairs may be for you. Outsourcers like to delegate the tasks to a contractor who can save them time and headache of doing it yourselves. While meeting with a contractor it is extremely important to write out the scope of the job. The scope includes exactly what will be done as well as the best estimate possible of the price. Outsourcing is the more expensive option, however, the quality of the work will likely be better with an experienced professional.
Some of the more popular non-cash options for remodeling costs are improvement loans, home equity lines of credit (HELOC), or refinancing of an existing mortgage. Whichever way you go, make sure it is tied to your financial plan.
-Mike
