Buy Ugly Homes With the Renovation Loans Listed Below !
HomeStyle® Renovation
Whether you need funds to help with repair contingencies or need help to update a home to meet your evolving needs, HomeStyle Renovation can be a powerful product offering, allowing you to finance home improvements with a conventional mortgage.
HomeStyle Renovation can make the difference between a house and a dream home, or a house that’s desperately in need of repairs and a home that’s habitable.
HomeStyle Renovation loans are:
- Simple – With standard pricing and conventional execution, loan funds can be delivered even before the project starts (subject to lender approval).
- Flexible – Updating a bathroom? Adding a mudroom? Replacing a roof? HomeStyle renovation can be used on any renovation project and can help save deals that have repair contingencies, up to 97% LTV or 105% CLTV with eligible Community SecondsTM financing.
- Affordable – Renovation costs may be approved up to the lesser of 75% of the purchase price plus renovation costs or the as-completed appraised value, and competitive rates that may be lower than a home equity line of credit (HELOC), personal loans, or credit cards.*
- HomeStyle Renovation loans help borrowers achieve a move-in ready home by combining renovation and purchase or refinance mortgages. We’ve compiled some of our most common questions on the offering below.
Yes, an accessory unit may be detached from the primary dwelling. All improvements related to accessory units must be in compliance with local and state codes and statutes. They also must meet the applicable Selling Guide requirements for accessory units in Section B4-1.3-05, Improvements Section of the Appraisal Report.
Yes, provided that the improvements are permanently affixed to the property.
The requirement to obtain an energy report depends on how the transaction is structured as well as the types of energy improvements completed.
Yes, manufactured housing is eligible for HomeStyle Renovation financing, up to the lesser of 50% of the as-completed value or $50,000. The manufactured home must meet the applicable Selling Guide requirements in Section B2-3-02, Special Property Eligibility and Underwriting Considerations: Factory-Built Housing.
General
Q1. Must a property be habitable at the time of closing?
No, Fannie Mae does not require the property to be habitable at the time of closing. If the home is not habitable, the borrower may finance up to six months of principal, interest, tax, and insurance payments to cover these costs while the home is uninhabitable.
Q2. Does the contingency reserve need to be 15% of total costs?
No. A contingency reserve is not required for a mortgage secured by a one-unit property, however the lender may choose to establish one. A contingency reserve equal to 10% of the total costs of the repairs and renovation work must be established and funded for a mortgage that is secured by a two- to four-unit property to cover required unforeseen repairs or deficiencies that are discovered during the renovation. The lender may increase the contingency reserve to 15% if it determines the higher reserve is appropriate given the scope and scale of the renovation.
Q3. Are “tear downs” allowed?
No, HomeStyle Renovation loans may not be used to tear down and reconstruct a home. A tear down would include removing the entire shell of the dwelling down to the foundation. Major renovations such as © 2018 Fannie Mae. Trademarks of Fannie Mae. March 20, 2018 2 of 4 additions or multi-room rehabilitations are eligible projects, provided they meet the applicable LTV requirements.
Q4. Must the improvements add value to the property?
No. Fannie Mae does not require that the improvements add value to the property. The appraiser must evaluate the proposed renovation during the appraisal process. The “as completed” value of the property with the improvements will reflect any contributory value of the renovation.
Q5. Do utilities need to be on at time of inspection for the appraiser to assess that utilities/appliances are functioning for a HomeStyle Reno loan?
No. However, the appraiser or lender may observe something that could make it necessary for utilities to be turned on to confirm there is no issue, or to confirm that the construction plans include all the work that needs to be done on the property.
Q6. Can the loan include a special assessment for sewer?
No. Funds for HomeStyle Renovation may be used only to complete new improvements to the property. Funds cannot be used to pay off existing debt or special assessments.
Q7. Can lenders utilize HomeStyle Renovation financing on a manufactured housing property?
Yes, manufactured housing is eligible for HomeStyle Renovation financing, up to the lesser of 50% of the as-completed value or $50,000. The manufactured home must meet the applicable Selling Guide requirements in Section B2-3-02, Special Property Eligibility and Underwriting Considerations: FactoryBuilt Housing.
Q8. Can an accessory unit be detached from the primary dwelling?
Yes, an accessory unit may be detached from the primary dwelling. All improvements related to accessory units must be in compliance with local and state codes and statutes. They also must meet the applicable Selling Guide requirements for accessory units in Section B4-1.3-05, Improvements Section of the Appraisal Report.
Q9. Can the financing be used to build another residential dwelling on the property parcel?
No. Funds may not be used to construct another residential dwelling on the property.
Q10. Can landscaping costs be covered?
Yes, provided that the improvements are permanently affixed to the property.
203(K) REHAB MORTGAGE INSURANCE
Summary:
Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.
Purpose:
Section 203(k) fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment. However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.
For less extensive repairs/improvements, see Limited 203(k). For housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD's Title I Property Improvement Loan program.
Type of Assistance:
Section 203(k) insures mortgages covering the purchase or refinancing and rehabilitation of a home that is at least a year old. A portion of the loan proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area. The value of the property is determined by either (1) the value of the property before rehabilitation plus the cost of rehabilitation, or (2) 110 percent of the appraised value of the property after rehabilitation, whichever is less.
Many of the rules and restrictions that make FHA's basic single family mortgage insurance product (Section 203(b)) relatively convenient for lower income borrowers apply here. But lenders may charge some additional fees, such as a supplemental origination fee, fees to cover the preparation of architectural documents and review of the rehabilitation plan, and a higher appraisal fee.
Eligible Activities:
The extent of the rehabilitation covered by Section 203(k) insurance may range from relatively minor (though exceeding $5000 in cost) to virtual reconstruction: a home that has been demolished or will be razed as part of rehabilitation is eligible, for example, provided that the existing foundation system remains in place. Section 203(k) insured loans can finance the rehabilitation of the residential portion of a property that also has non-residential uses; they can also cover the conversion of a property of any size to a one- to four- unit structure. The types of improvements that borrowers may make using Section 203(k) financing include:
- structural alterations and reconstruction
- modernization and improvements to the home's function
- elimination of health and safety hazards
- changes that improve appearance and eliminate obsolescence
- reconditioning or replacing plumbing; installing a well and/or septic system
- adding or replacing roofing, gutters, and downspouts
- adding or replacing floors and/or floor treatments
- major landscape work and site improvements
- enhancing accessibility for a disabled person
- making energy conservation improvements
HUD requires that properties financed under this program meet certain basic energy efficiency and structural standards.
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