Buying A Historic Home: Pros & Cons, Grants And How To Buy

Do you love older architectural styles and dream about living in a house with history? Historic homes offer a unique character and charm you may not find in newer homes, and they are often built better than newer homes.

But with their character and charm comes their fair share of challenges.

It’s important to know what to expect before you buy this type of house. We’ll share the pros and cons of buying a historic home and tell you everything you need to know about purchasing a home that’s a standing monument to the past.

What Is A Historic Home?

Historic homes are registered to the U.S. National Park Service’s National Register of Historic Places. Homes on the list offer homeowners a few benefits, including access to grants and tax credits, plus the opportunity to turn your historic home into a modern-day teaching tool.

A home must be at least 50 years old to qualify as a historic home. Depending on the structure, it must meet some or all the following requirements:

• Associated with a significant historic event
• Associated with a historically significant figure(s)
• Associated with a practice or feature connected to a specific era
• Embodies unique characteristics that fit a specific era
• Located within a historic community

Local historic districts are responsible for the maintenance and preservation of historic homes.

Pros And Cons Of Buying And Owning A Historic Home

While you may be ready to embrace the character and iconic craftsmanship of a historic home, are you ready for the challenges associated with a historic home? Let’s discuss a few pros and cons of buying and owning a historic house.

Pro: Historic Homes Are A Piece Of History

When you purchase a historic home, you own a piece of history. Newer homes are often built on cookie-cutter designs, while historic homes often have a charm and style all their own. Homes from the past typically feature unique floor plans and design elements that reflect a time that’s very different from our present.

Historic homes are often located in older, more developed neighborhoods dedicated to historic preservation. The neighborhoods are typically well-maintained and feature trees, lush gardens and plenty of green space.

Pro: Buying A Historic Home May Offer Tax Benefits

Owners with homes on the National Register of Historic Places list may qualify for certain tax benefits. According to the National Parks Service, historic homeowners may qualify for a 20% income tax credit for home renovations if the work qualifies under the Secretary of the Interior’s Standards for Rehabilitation and Internal Revenue Service (IRS) guidelines.

Homeowners who donate a property easement to a preservation organization – allowing the group access to the property for historic preservation purposes – may be eligible for tax benefits.

If you’re interested in your eligibility for either benefit, consult a tax professional.

Pro: Buying A Historic Home Can Be A Good Investment

Well-preserved historic homes in well-maintained historic areas often appreciate in value faster than newer homes in the same area. Historic homes can be a good investment, depending on upkeep, tax credits and other factors.

If you want to buy a historic home as a real estate investment, you may need to look elsewhere for a profit-generating property.

Do your research to ensure the property will be worth the capital you pour into it to renovate it. And verify that flipping the house is possible, even with restrictions and easements in place.

Con: Historic Homes Can Require Costly Maintenance Or Repairs

Given the minimum age of historic properties, the homes may require more repairs and renovations from decades of wear and tear. Many older houses were built with natural materials, leaving the home’s structure vulnerable to environmental deterioration. Aged homes are more prone to termite damage, foundation issues and other structural problems.

Older homes may require expensive renovations upfront and are more likely to require updates before moving in. It’s important to get a home inspection and identify any potential problems so you can create a budget to cover any repairs or upgrades.

Con: Renovations And Improvements May Be Regulated

Homes registered with the National Register of Historic Places may be subject to regulations restricting a homeowner’s ability to make certain changes to their home. The regulations are in place to protect the historic character of the home. Limits can be placed on visible additions to the home and other changes that may significantly change or damage the home’s exterior or interior.

Renovations may prove challenging. If your property’s not approved for certain major home improvements, you may be stuck with old, drafty windows or other issues you can’t resolve.

Con: Securing Financing And Insurance Can Be Challenging

It can be harder to get mortgage approval on a historic home because they’re considered riskier investments than newer homes. Mortgage approval typically depends on a home appraisal, and appraisers may be more hesitant to assess a historic home. And the home must meet stricter appraisal standards if you’re financing your purchase with certain mortgages, like an FHA loan.

You may encounter the same challenges as you shop around for homeowners insurance. It may take longer to find insurance companies willing to insure a historic property. And don’t be surprised if the policy is more expensive than you anticipated.

How To Buy A Historic Home

For the most part, buying a historic home follows the same steps as purchasing a newer house. But there will be additional steps to tackle during the home buying process to protect your investment.

1. Find A Historic Home

The best way to find a historic home is to work with a real estate agent. An agent can offer guidance on where to search and what to consider. And an experienced agent may even identify historic neighborhoods for you to visit.

You can also use listing websites, like Rocket Homes^SM, to find older houses. Set the construction date filter to homes built before 1950 to find homes with history.

2. Identify Easements Or Renovation Restrictions

Before purchasing a property, check for any easements or restrictions that may limit renovations or provide public access to the property. For example, the property may have an easement that allows people to cross a path through your front yard. Or there may be a ban on putting up a fence blocking the view from your neighbor’s yard.

Have a title company conduct a title search to find any easements on the property. You should also reach out to the local historic district to get familiar with any restrictions they may have put in place.

3. Acquire Financing And Grants

The next step is to get the financing that allows you to purchase the home. Find a mortgage lender and get a mortgage preapproval for an estimated loan amount. Historic homes may require more than just a loan to buy the home. You’ll likely need money to pay for renovations on top of the price of the home. You should explore financial assistance to help cover any renovations.

Look for first-time home buyer assistance programs or government grants for renovating a historic home. You can find grants and loans at the federal and state levels to help relieve some of the upfront costs of rehabilitation.

Consult your lender, your local historic district and visit the website of your area state historic preservation office (SHPO) to explore your options.

4. Get A Home Inspection

Having your home inspected is crucial, especially when purchasing an older home. A home inspection identifies the major issues in a home that need fixing. You may likely find structural damage, faulty heating or cooling systems and many other issues in a historic piece of real estate.

Mortgage lenders don’t always require a home inspection, but it's likely worth the money and peace of mind when purchasing a historic house.

5. Get A Home Appraisal

You’ll need to get a home appraisal. The appraisal process is similar to a home inspection, but an appraisal isn’t about inspecting a home for defects; it’s about estimating a property’s fair market value (FMV).

Appraising older homes is challenging. It may take some time to find an appraiser willing to inspect the property. A home appraisal requires comparable properties to help determine a home’s value. Some historic homes may not have comparable properties nearby for an appraiser to compare.

6. Close On Your Historic Home

The entire closing process typically takes around 30 – 45 days. On closing day, you’ll sign documents, make your down payment and pay closing costs. The home’s title gets transferred to you, and you officially become the new owner of a historic property.

Buying A Historic Home: FAQs

As a potential historic homeowner, you likely have a few more questions. Read through our answers to common questions about buying a historic home.

Are historic homes worth more?

Historic homes commonly have higher values than other homes in the same areas. But it depends on the property. Research the historic home ahead of time to gain insight into the demand for the home and its market value. A real estate agent should also be able to help you estimate the home’s value.

Are historic homes hard to sell?

Some historic homes sit on the market longer than traditional homes because buyers worry about the upkeep associated with these homes. Owners of historic homes often pay more for maintenance and repairs than owners of newer homes. It doesn’t mean a historic home won’t sell. It just means you also need to target the smaller pool of buyers drawn to the history and charm of historic homes and want to preserve their legacy.

How do I know if buying a historic home is worth it?

Rely on the home inspection and your real estate agent to determine whether buying a historic home is worth the money. Your agent can help you assess the expected cost of repairs and any tax breaks you’re eligible for to determine whether you’ll get a return on your investment. You should also contact your local historic district and state historic preservation office to ask about grants.

The Bottom Line

The reward of buying a historic home is owning a house straight out of another era. But the risk is the increased maintenance and repairs you may need to invest in the home. Old homes have charm and character you aren’t likely to find with newer homes. But due to their age, they may need more costly TLC. Do your research before buying to ensure you’re ready for the financial commitment of a historic home.

If you want to buy a home filled with charm and history, start the approval process with Rocket Mortgage^®.