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Fixer-upper or move-in ready?

GAINESVILLE, Ga. (BP)–Is it financially wiser to buy a home that is a fixer-upper or one that is move-in ready?

Well, that depends, because obviously the answer won’t be the same for all situations.

For example, if you are handy with a hammer and super with a saw, then congratulations, you may be a candidate for buying a fixer-upper house.

However, if you think a “bench mark” is what happens when your furniture sits too long on the rug, or that “drywall” simply means there are no leaks in the roof, then maybe you’d better look at a home that’s move-in ready.

Generally speaking, those interested in fixer-uppers are willing to invest some sweat equity in order to make a profit and then move on. If that doesn’t sound attractive to you, chances are that you’re the sort of person who would rather just move into a reasonably ready house.

But, wait a minute. It could be that you’re not financially prepared to do either one. You see, your first decision probably should be whether to rent or try to buy a house. Most people see no point in paying rent when you could be accumulating equity. However, if you were to “over-buy” a house — even a fixer-upper — your debts might accumulate faster than you could accumulate equity.

It all hinges on your budget. If you have the money to make a down payment and you can afford the monthly payments, it’s probably wiser to purchase.

The No. 1 cause of financial difficulty, especially for young couples, is purchasing a home more expensive than they can afford. And that kind of financial stress provides the fuel that can result in broken relationships.

So the first question is, “Do you have a down payment?” The second one is, “Can you afford the monthly payment with income from only one family member?” Those two requirements are very important, because many people buy or build a house and then try to stretch their income to fit the house, rather than starting with their income and finding a house that fits it.

And remember this: An unexpected illness or pregnancy might make it impossible for one of the wage earners to work. In that case, how does that high monthly mortgage get paid?

The Bible says, “Complete your outdoor work, and prepare your field; afterwards, build your house” (Proverbs 24:27). So, don’t get your priorities out of order.

You should consider a number of suggestions when buying a house, whether it’s move-in ready or a fixer-upper:

— Be realistic and start small.

— Location, location, location — it’s the real estate creed.

— Today, the flood of foreclosures provides lots of houses that are both in need of repair and those ready to move in. That scenario also means there are lots of scam artists out there, ready to take advantage of you.

— Be careful of foreclosures. Seek legal advice and think twice before signing anything.

— People in foreclosure are vulnerable. The Bible has much to say about taking advantage of those who are vulnerable or in some sort of crisis — such as the distress of a foreclosure. Psalm 41:1 says: “Happy is one who cares for the poor; the LORD will save him in a day of adversity.”

— Be willing to keep your first house five or six years and put lots of love and labor into it and you’ll build equity.

— If you are trading up, buy a house that’s no larger than you need with payments you can afford.

— Free up some of your surplus funds each month to repay the mortgage principal in order to pay the mortgage off as quickly as possible. However, if you’re thinking of paying off your mortgage early, be careful that you don’t sacrifice everything to do so. There may be other things that are higher priorities for your family than paying off a mortgage early. Only you and your spouse can make this decision together, and you should use no more than a percentage (not all) of your surplus funds if you do decide to pay off your home early.

You would be wise to use no more than 40 percent of your net spendable income (what’s left after tithes and taxes) on housing — this includes mortgage payments, taxes, insurance, utilities, and telephone bill, and maintenance on the house.

When housing expenses reach 45 to 50 percent or more of your net spendable income, the likelihood is that you’re a candidate for serious financial difficulty. Couples who purchase homes far more expensive than they can afford might not only lose the homes but also have their marriages threatened by the resulting stress.

Each family should learn God’s principles and guidelines for buying a home and then make the decision based on what God specifically reveals to them about the lifestyle they are to lead. Many of us could easily downsize our housing situation and still have very nice, comfortable, affordable homes.

About 10 years ago, two staff members of Crown Financial Ministries built debt-free homes. Impossible, you say? Well, they were able to do it because their spouses were willing to be totally committed to the concept, and they had the resolve to put in a lot of that sweat equity mentioned earlier. It can be a very difficult road to take and they did without some things for the short term, but now they are enjoying the freedom of living in a debt-free home. It works.

So, what’s best for you — a fixer-upper or a home that is move-in ready? Be sure that your decision — the steps you take — are God-directed steps.
Howard Dayton is co-founder of Crown Financial Ministries and the current host of Crown’s radio program, “Money Matters.” Dayton and the late Larry Burkett joined forces in 2000 when Crown Ministries, led by Dayton, merged with Christian Financial Concepts, led by Burkett. The new organization became Crown Financial Ministries, on the web at www.crown.org.

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  • Howard Dayton