If you’re shopping for property in Southern California, then you know the competition is high for a consistently low inventory, driving buyers to look for more affordable options.
And maybe you found it, that diamond in the rough: a fixer-upper in Corona, California.
The listing price is right, the potential is there, but first, you’re going to have to figure out how to make it liveable. Given that the cost of work required could range anywhere from $50,000-$500,000 depending on the property, your location, and your preferences, what seemed like a bargain could suddenly balloon into a massive price tag.
If you are a veteran, you may have been hoping that you’ll be able to purchase the home with a VA loan. But the requirements for properties under these loans include being move-in ready, making most fixer-uppers not eligible for VA financing. And with a standard VA loan, you aren’t able to take out additional funds to help you cover the cost of your renovation.
Your options at this point include paying cash or getting a conventional mortgage – and being responsible for additional costs like private mortgage insurance and a down payment.
Therefore, that Corona fixer-upper may not actually offer you the best savings in the long run.
Your best option when buying a home in a place like Corona with a VA loan is to find a property that needs renovations you can do over time. That way, you can refinance your existing loan down the road with a VA cash-out loan, whether that first loan is through the VA program or not. Once you have a certain amount of equity built up in the property, you can apply for the new refinance loan which allows you to take out additional cash on top of your existing financing balance to use for renovations.