Finding Opportunity Amidst Low Housing Inventories
Article published in Northampton Living
(August 2024)
EXPERT CONTRIBUTOR
Lindsay Baron LaBonte Branch Manager NMLS #381413
Mortgage
Applied Mortgage a HarborOne Mortgage Team 413-586-5626 appliedmortgageteam.com
llabonte@harborone.com
The current housing market is one of high buyer demand and low housing inventory – creating a market heavily weighed toward sellers. Buyers may feel they are short on viable housing options and stuck in bidding wars. Some buyers have sought refuge by opting to renovate or build their dream home instead. Let’s take a closer look at the pros and cons a consumer may face when renovating or building a home.
Building Your Dream Home
When it comes to building, one exciting possibility is choosing every detail of your home exactly how you envision it. From the location of the land to the layout of rooms to the placement of fixtures, every detail can be tailored to suit your preferences. A new home also offers the assurance of less maintenance. With modern construction materials and state-of-the-art energy-efficient features, newer homes typically require fewer repairs and have lower energy costs compared to older properties. This not only saves money in the long run but also provides peace of mind.
Manifesting Through Renovating
Although slightly less customizable, finding an existing home and renovating can provide a similar opportunity. Many buyers overlook properties that need updating or have deferred maintenance. If a house sits on the market, it may be possible to avoid the bidding wars and purchase a home below market value. Some worry they may run into unexpected costs, but with the right team of contractors, buyers can understand the projected cost of their renovation in advance of purchasing the home.
Buyers looking to build or renovate do run into some challenges. Acquiring raw land may involve substantial upfront costs and necessitate extensive site work. Older homes may also need more extensive work to major utility systems or have unexpected overages on costs. Moreover, the process of selecting every detail can be overwhelming for some. Building or renovating may not be right for buyers who want immediate results, as it takes research and time to find the right opportunity.
How to Finance Your Imagination
The right mortgage financing tools can help offset the challenge of meeting a construction or renovation budget. For renovation, there are a variety of lower down payment loan options including the Fannie Mae Homestyle Renovation loan and the FHA 203K products, which may allow financing with as little as 3% or 3.5% equity for qualified buyers. For more extensive projects or a full build, buyers may seek a construction loan. A construction loan typically requires a larger down payment of 20%, reflecting the higher risk associated with building brand-new.
While building or renovating a home involves careful planning, higher initial costs and time commitments, the ability to create inventory often outweighs the challenges. Whether you opt for building new, renovating an existing home, or buying an existing home, the choice ultimately hinges on your priorities and financial wherewithal. Contact our team to learn more about construction or renovation loan options.
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