The cost of housing can be high. Some people need more help than others to climb onto the property ladder. Being open to including a fixer upper to your list of potential homes may reveal opportunities that might normally be out of your budget. Using rehabilitation financing (rehab) loans might be a great way to get into home ownership and fund the necessary improvement projects.

Not a handy person? No problem. Most rehab loans allow you to hire professional contractors to do the work for you.

Homes may be bought at below-market rate, which helps lower costs and may increase how much home you can buy and stay within your budget. Once rehab work is completed you can end up with a home that looks and feels brand new. The trend is growing among homebuyers, first-time or other, and your new home may be attainable with rehab financing. Rehab loans are offered through housing agencies and other organizations. CHFA's program is called UR Home and allows people who live and work in specific cities in Connecticut to acquire a loan to perform rehab work. In Massachusetts, MassHousing offers a similar program. In some cases the loan is forgivable after a certain amount of time, generally five to seven years, which means all the work you put into your new home can potentially be at no additional cost to you! Other loans are simply added to the total purchase price of the home.

On top of all the normal concerns that come with buying a home, there will be additional thoughts to consider when buying a home with a rehab loan. You may have to enlist the help of additional home ownership professionals like contractors to complete your rehab work. Many programs require it.

Here are a few things to consider during the purchase of a home that will go through rehab:

1. It's critical that you create a budget. Rehab money is finite. There are minimum and maximum limits to the amount of funds you'll receive to get your home fixed up. Carefully plan out all your projects with professionals before a single tool is lifted.

2. It's not uncommon for your project to go over the amount you planned to spend. Unforeseen or hidden issues, like rot under floorboards or weathered electrical wiring behind walls, could increase costs. As a rule of thumb, make your original budget for the project is at least 10% below the value of the loan, so you will have an extra 10% to put toward unexpected expenses. Some rehab projects help make up for overruns, and such an adjustment would be built into your agreement. Read your agreement carefully and ask as many questions as possible to avoid costly consequences.

It's important to note that each rehab loan is different. Some allow for cosmetic changes like granite counters, stainless steel appliances, and the like. Others allow strictly for structural and safety improvements such as new walls, windows, and flooring, only to bring a home back to a habitable state. Also, many uninhabitable homes are ineligible for a mortgage without the use of a rehab loan.  There is a large inventory of these types of homes available in this category due to increased foreclosures and increased maintenance costs that the previous homeowners could not afford.  Rehab programs like the FHA 203K requires only 3% of the total cost of the purchase price plus the repairs and has a more aggressive qualifying standards because it is government secured.

With tips like these you can now expand your choices during your home search. Considering a rehab loan is an opportunity to make your first home dreamy.