How to Buy a Fixer-Upper House with Low or No Money Down

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|10 min read

Some people enjoy the ease of a move-in ready house, while others want the challenge of a fixer-upper. When you buy a house that needs serious renovations, you must compare your potential down payment with the cost of getting the home in working order.

After all, you can’t put all your money into the down payment if the house doesn’t have working plumbing or has a massive hole in the roof. You should minimize the money you put down to invest in renovations instead. This is particularly true if you buy the house to flip for a profit in a few months. 

There are multiple ways to buy a fixer-upper house without large down payments. In this guide, we’ll explore real estate investment opportunities with fixer-upper houses and how you can buy one with low or no money down.

Let’s get started…

Are Fixer-Upper Houses Worth It?

There are several reasons why buyers actively seek out fixer-upper homes.

They are usually more affordable because of all the work that needs to go into them. You might find a house in your dream neighborhood at a fair price because it needs work. Other people enjoy the challenge of making repairs and interior design improvements on the properties they buy. 

A fixer-upper house can also be a strategic investment. The buyer can flip the house by making repairs and selling it a few months later at a higher price. The house can also become a long-term investment property by bringing in rental income once the repairs are made. 

Whether you want to buy a fixer-upper house for your personal use or to bring in professional income, you must have a clear financial picture of the risks and rewards so you end up generating profits from your investment.

How to Buy a Fixer-Upper with Little to No Down Payment?

There are two key challenges that come with investing in a fixer-upper house: finding a property and securing financing for it.

Here are a few different loan options you can look into that require small down payments – and, in some cases, no down payment at all.

FHA 203(k) Loans

The first place to look for a renovation loan is the Federal Housing Administration (FHA). These loans build renovation costs into the mortgage, so you only need to apply for one line of financing.

For example, you could apply for a $200,000 loan to cover the cost of a house and $100,000 to cover its repairs. The loan would register a $300,000 mortgage paid like any standard home loan.

FHA loans are known for requiring small down payments. If your credit score exceeds 580, the minimum down is 3.5% for your FHA 203(k) loan. Some states have buyer programs that cover these down payments, reducing the amount you must pay upfront to buy your fixer-upper house.

Keep in mind that a traditional mortgage with minimum money down will require you to have private mortgage insurance. You will have to pay this extra monthly fee until you own at least 20% of the property.

Additional Renovation Loan Options

Many government and private money lenders are also willing to work with buyers interested in fixer-upper properties. If you are an active or veteran military member, you can go to the Department of Veterans Affairs to apply for a VA renovation loan for a desired home. 

Each renovation mortgage comes with limitations and requirements for approval. For example, some loan programs might only be applicable if you are applying for a primary residence – which means you live in the fixer-upper house full-time.

Even without a large amount of money down, you will need a minimum credit score and must fulfill other requirements to assure your lender that this loan is safe. 

This is why working with real estate agents is so important. They can recommend potential loans for securing fixer-upper houses.

Buying with a Partner or an Investor

You don’t necessarily have to rely on a renovation loan to buy a fixer-upper.

If you are buying an investment property, you can work with other business partners who might be able to put money down instead. You would work with these other investors to discuss the equity each person has in the house and how the profits are shared.

For example, if you don’t bring your own money to the table but can make the repairs yourself, you would receive sweat equity in the property. 

While investment properties are potential opportunities to build wealth, you need to trust the people you work with. Make sure you get every purchase and revenue detail in writing so each party can fairly divide the profits.

Seller Financing Deals

Another option is to work directly with sellers to purchase properties. This usually occurs when potential buyers reach out to homeowners in distressed homes – which means they are about to fall into foreclosure.

This option is often a good choice when you are using your own money to buy property and don’t need to secure a conventional mortgage.

The owner can save money by not paying the real estate agent fees, while the buyer can skip the mortgage approval process and move into the home within a few weeks.

How Real Estate Agents Can Help You With a Fixer-Upper House

Some real estate agents specialize in helping buyers find fixer-upper properties. They can help you navigate the buying process while also offering advice for securing financing with minimal money down.

Here are a few ways your real estate agent can make this process easier.

Leveraging Expertise

Buyers looking for standard homes can use sites like Zillow to find properties. However, fixer-upper homes aren’t always marketed on these apps. Even if they are, they might not show up at the top of the listings because of the algorithm – fewer buyers are interested, which causes the house to show up less often. 

This is where your real estate agent comes in. They can help you identify properties that have high potential but need major repairs. They also might have pocket listings to share with you before they enter the market. This is one of the main benefits of hiring an experienced agent if you are planning to buy a fixer-upper house. 

Benefits of Networking

Experienced Realtors have a diverse network of lenders, investors, and other agents representing various properties. They can connect you with relevant parties and open up opportunities you normally can’t access.

As you contact real estate agents to represent you, ask about their network. You want to work with someone who is a leader in your local real estate market and can get you connected to as many parties you might need to buy a home.

The Agent’s Role in Securing Financing

While your real estate agent cannot secure loans for you, they can recommend lenders who have helped buyers get financing for fixer-uppers in the past. They can also suggest potential loan opportunities and financing options that might work for your particular situation.

For example, if a previous client secured a renovation loan, they might share insight into what the loan process looked like and how long it took. 

Every home purchase is different, but an experienced agent will identify similar traits and patterns in your situation that they can apply advice to.

Ways to Find the Ideal Fixer-Upper Houses to Buy

One of the biggest challenges of securing your fixer-upper is finding your ideal property. Some people want to buy a dream home they can remodel to meet their tastes for a lower price, while others buy fixer-uppers to renovate and flip for a higher valuation.

Here are two of the best ways to find potential fixer-upper houses:

Foreclosures and Auctions

When a house enters foreclosure, the bank or private lender seizes it from the owner. It will then try to recoup as much of the money that the former owner owed as possible, usually through an auction. This is a great way to acquire a property for a low purchase price which would then give you a larger renovation budget.

In fact, you might be able to buy the house for cash at auction and use renovation loans specifically to cover the cost of repairs. 

There are some limits that make these purchases difficult. Some auctions require investors to buy properties sight unseen. This means you won’t have a clear picture of the necessary renovations until you actually walk into the home you bought.

Utilizing Online Real Estate Platforms

Depending on your area, buying a fixer-upper could be as simple as logging on to a real estate listing website.

While it is harder to find these properties online, they are there and will require setting up suitable search filters. Your Realtor might also direct you to specialty fixer-upper websites to network with investors and find homes that can be turned into rental properties.

Tips for a Successful Renovation on a Tight Budget

Buying a fixer-upper might seem hard, but it is just the beginning. Once you own the property, you must make the necessary repairs to get it in working order while balancing your renovation projects with your budget and profit goals.

Prioritize Essential Repairs

You don’t always get to choose the renovation process. Instead, you need to take a triage approach where you address the most critical issues first.

For example, if the roof is leaking, water can flow into the house and destroy the insulation, walls, floors, and electrical systems. This means the roof needs to be the priority. Failing to address major renovations from the start can cause additional issues further down the line.

After buying a fixer-upper, your first goal should be to make the house livable as soon as possible. The more you get caught up in minor repairs the longer it will be before someone can move into the home. 

Strike a Balance Between DIY and Professionals

At first, it might seem like your renovation loans are extensive and should cover all your projects, but you soon realize that money is tighter than you think. Identify which projects you can do independently and which need professional expertise. 

For example, never handle electrical work by yourself. You need a licensed contractor to make long-term repairs and ensure the wiring is safe. However, minor home renovations like painting and carpet installation can be handled without expert help. 

Source Affordable Renovation Materials

There are two financial aspects to each repair or renovation: the materials cost and the labor. If you do a project yourself, you don’t have to worry about paying labor rates. If you hire a contractor, ask them to break out the cost of labor and materials separately. 

Look for opportunities to save on materials without buying cheap or unreliable items. Wait for seasonal sales at home improvement stores or buy bulk items at wholesale shops. You can also visit thrift stores and other discount markets to find light fixtures and decorations for your home.

Budget with Caution

Buying a fixer-upper requires you to have the financial know-how to juggle multiple projects at once. Not only do you need an idea of what various repairs cost, but you need to make sure you don’t go over budget.

If you exceed your loan amount, you will have to find other ways to fund your renovations. You could rack up credit card debt or have to take out extra loans to make the repairs. 

If you aren’t careful, your dream house could become a money pit with too many unplanned repair costs.

Be Wary of Overcapitalization

Another reason to carefully monitor how much you spend is that you don’t want your spending to exceed the value of the house.

For example, assume you take out a $200,000 mortgage and $150,000 for renovations. The home value by the time you sell needs to be at least $350,000. It likely needs to be around $400,000 so you turn a profit on your efforts. If your loan amount exceeds the value of your home, you risk losing money on the project. 

Overspending on renovations can limit how soon you resell the house. It can also increase your debt or monthly loan payments. Consider how much you plan to put into the house and the long-run finances of the project. This can help you keep a clear budget with your profits in mind.

Buying a Fixer-Upper is Easy With the Right Agent

Whether you are looking at primary residences where you want to live full-time or feel ready to invest in a rental property, it is possible to find a fixer-upper in your area that you believe in. These repairs and renovations are a lot of work, but they can pay off if you are committed to making the improvements. 

Start your search with a qualified real estate agent in your area. This is where FastExpert can help. You can read profiles of local agents and hire one who specializes in fixer-upper houses. The right agent can make this process easier. 

Try FastExpert today and hire a qualified Realtor who can turn your homeownership dream into a reality.

Amanda Dodge

Amanda Dodge is a real estate writer and expert. She has worked in the field for more than eight years. She spends her time writing and researching trends in real estate, finance, and business. She graduated with a bachelor's degree in Communications from Florida State University.

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