Hindsight is 20/20

One of my husband's most frequently used mantras is "hindsight is 20/20."  I do not know the original origin of this phrase, but I definitely understand the meaning.  DISCLAIMER: I am not employed by any bank, I am not in any way a financial adviser, I am simply a DIYer and third time home buyer sharing some things I have learned along the way!

During the process of trying to get our latest project started, I often lamented, "where did we go wrong?"  The price of the house was essentially the price of an entry level luxury sedan and even factoring in the cost of renovation, our final cost would be in the neighborhood of $35,000 less than our last home.  Talk about money in the bank!  With a reduced mortgage I could pursue my dream of opening my own business and we could stash away a nice nest egg so we can retire in a gazillion years.  Buying a fixer that requires a complete gut job is no easy task, but the rewards can outweigh the hair pulling, teeth grinding, wishing for a lobotomy moments. IF...done correctly.

Here is what we did:

- Called a home inspection
- Signed a 30 year fixed mortgage at 6.something percent (it was a second home at the time of closing, thus the higher interest rate)
- Made our monthly payments on time
- Began the original lipstick fix (to use as a cottage)
- Moved there permanently and applied for loans to renovate
- Were denied loans because the house lacked equity
- Began demolition for the larger scale renovation
- Banged our head against a proverbial wall when the few month planned stay at our parents turned into 8 months and we still had no prospect of a loan!
- Became desperate and prayed the neighbors snow laden pine tree would come crashing down on our empty house as the hours, days, weeks, and months ticked by...

Essentially we created a cluster due to our lack of knowledge and planning.  Looking back here is what we should have done:

- Called 2 home inspections (one from the bank for the mortgage and an independent one to find out how FUBARed the house really was)
- Ran Away!!! (Insert sinceriod)
- Contacted our realtor to get recently sold neighborhood comps to have a solid price range to keep in mind when budgeting a renovation
- Researched types of loans to find out the difference between what each bank tries to sell you as their "renovation loan" (these vary from equity lines of credit, bank credit cards, refinance, cash out refinance, and construction loans, all of which are vastly different in terms and amounts which can be borrowed!)
- Signed a 30 year fixed mortgage that included the renovation loan (which in our case was a refinance since the home held no equity given the poor condition and the amount we required exceeded what could be put on a credit card.  Also, by keeping the original structure it was considered a remodel, but if we tore the entire structure down and kept the basement it would be considered a construction loan.)

Good to know:
- Banks run from DIYers after the housing bubble burst so hire a licensed contractor who will allow you to subcontract out different aspects of the project to save $
- Secure the renovation loan with your mortgage so you only go through the arduous piles of paperwork one time!
- Be patient, this is not a move-in-ready process.
- Be reasonable with your time line and choose your alternate living arrangements accordingly (my parent's have been very gracious, but living in your childhood bedroom no matter how temporarily is a tough pill to swallow, not to mention a total damper on your, um, "relationship" with your spouse!)