You can save money by buying a home that needs a lot of repairs, in addition to the equity that will add up from all your effort and willingness to do all the work yourself. The only problem is that fixing up a home is not physically or financially simple and can test your ability patience as well. These are the disadvantages of buying a fixer upper home:
Living in it while fixing it. You either have to move into the property while you work on it, or pay for another place to live, while spending money to make improvements on the fixer upper, in addition to the new mortgage payments. It can make life hectic to stay in a house that needs plumbing, flooring and other replacements.
More costly than you expect. You might have an estimate in your mind on how much it’s going to cost to make all the repairs on the home, but there are always surprises that come along to drain your bank account even more. No matter how much you think you might spend, add 10% onto that amount just in case you end up needing it.
The home might not qualify for FHA financing. FHA does not insure loans on properties that do not meet their safety standards and fixers notoriously do not qualify for this type of low down payment financing, which is currently 3.5%. The only way to get this type of financing is through an FHA repair loan. Otherwise, you may have to go with conventional financing, in which case you will have to pay up to 20% down on the purchase price of a home.
Know how is a must. Even if you aren’t planning on making the repairs and improvements on a home yourself, you still need to have a good idea what is wrong with a house and how it needs to be fixed. If you plan on doing it yourself, you either have to know a lot, or learn how to repair almost any part of a home.
It’s time consuming. Don’t overestimate how quickly you can get all the repairs done. Unless you have a lot of money to hire help, you will probably find yourself fixing up the house for a long time before it meets your standards. When you tear out one part of the house, you may find there’s more work that needs to be done, which will increase the amount of time it’s going to take to complete just one project out of many. You may want to resign yourself to the possibility that you could be working on improving the home for much longer than your original timeline.