Buying a Home with Plans to Remodel

OPINION

It’s an all too common story. You found the perfect home in the perfect location, but it’s lacking that modern kitchen you’ve always wanted or that extra bathroom your family desperately needs. Some helpful tips for purchasing and renovating your next home:

Know Your Budget

First, look at your monthly budget. Make sure you can afford the home, including property taxes and homeowner’s insurance. Next, start thinking about how you would finance any renovations. Do you have the cash to fund your kitchen remodel? Or, will you have to finance your project? This could affect your monthly budget drastically.

Timing is Everything

When submitting your offer, request a long due diligence period – the timeframe given to you to evaluate your future asset. During due diligence, you’ll want to: get the home inspected, consider renovation changes, obtain estimates, and get bank approval on all loans. A good time span is 60 days, and for very extensive renovations, you may want to ask for 90 days.

Choose Your Team

As you’re looking at homes, have your team in place. This might include: an architect, a licensed general contractor, a design-build firm, mortgage loan officer, and of course, your realtor. The earlier your trusted team is at hand, the easier the process will be.

Do Your Due Diligence

Once your offer is accepted, it’s time to get your home inspected and start the design process. If financing your renovations, your lender will need to approve the drawings prior to closing. Approval can take 30 days or more, so make sure that any offers include an understanding by the buyer of the process that your bank will need to follow.

How Construction Loan Financing Works

After the estimate and drawings are submitted to your lender, your lender’s appraiser will calculate what the house will be worth upon completion of the proposed project. The After Repair Value (ARV) is based upon the drawings and proposed pricing for the renovations. The ARV determines how much money will be available for your described renovation. It is essential to work with a bank and an appraiser that fully understand your renovation goals.

During Construction

Your total budget for the project may be substantial, but while your project is in the construction phase, you typically pay only interest on your loans and at a discounted rate. In addition, your property taxes are deferred. For many construction loans, your regular monthly payments only start back up again once construction is complete, and you’ve received your final inspection.

Renewal Design-Build is a Decatur-based residential remodeler specializing in designing and renovating whole houses, additions, kitchens, bathrooms, and more throughout Intown Atlanta. www.RenewalDesignBuild.com