Are you in the market for a new home and considering one that needs work?

Buying a house that requires renovations can be a great way to find a deal, but before you decide to move forward with an offer to purchase, ask yourself some important questions.

Can Your Budget Accommodate Renovations and Unexpected Costs?

While you are compiling costs, don't forget to add any permitting expenses. Check your local city, county, and state regulations so you can acquire the appropriate permits and order any inspections that might be required.

When you've finished estimating your budget, add 15% for unexpected expenditures and repairs required by any inspections, such as lead paint removal, mold remediation, etc. The "Murphy's Rule" of thumb is that everything takes longer and costs more than first anticipated!

Further, you'll need to check with your lender to find out whether you will qualify for a conventional mortgage or will need a renovation loan. Be sure to ask your lender about the financing that might be available to you and what type of home to include in (or remove from) your search.

How Much of the Work Can You Handle Yourself?

One way to keep renovation costs down when buying a fixer is to tackle as much of the work as possible yourself, but it's important to be realistic about what projects truly qualify as DIY. If you have experience in the contracting trades or have renovated a home in the past, you may be able to do much of the work yourself. Most people, though, will need to leave the bigger, more expensive projects to the pros. Determine how much of the work is truly cosmetic and what will require more than some new paint or carpet. Check the ego at the door to avoid getting in over your head and, ultimately, spending more money than you have in the budget – or worse, putting yourself in an unsafe situation.

How Soon Do You Need to Move In, and Do You Have a Place to Stay in the Meantime?

If you have a place to stay and don't need to move into the home right away, then time may not be a major issue. If you need to move in ASAP, a fixer-upper might not be the right choice when buying a house. Depending on the level of work that needs to be done, living in the middle of a renovation with nowhere to get away from the mess can create a great deal of stress. Don't let the "romance" of creating your dream keep you from being realistic about the work it involves. The programs on television may make things look easier than they really are.

Do You Have Trusted Service Providers?

No matter how much or how little of the work you can handle DIY, you'll likely still need contractors, an architect, and other service providers to tackle key tasks. It helps to have people you know and trust – or referrals from trusted sources – when coordinating work on a fixer-upper. Having quality service providers helps keep added costs down and makes it easier to keep the project on schedule.

Do You Have a Vision for the Home You'd Like to Create?

Success with a fixer-upper depends in large part on having a plan and being able to see it through to completion. Before you begin looking at homes, do your best to have a vision of the home that you want to create. Then, as you are house-hunting, keep that vision in mind so you can avoid trying to push a round peg through a square hole. If you are set on a 2-story, looking at a single-story with plans to add on might be one bite more than you are ready to take. Again, be realistic in your expectations and plans.

A fixer-upper can be a terrific way to get a great home. Take the steps needed to protect yourself and your investment by doing your research first!