When we hear the term “renovation loan” most of us in the mortgage industry think first of the FHA 203(k) program. While this is a great option for many scenarios it shouldn’t be the only one in your rehab loan toolkit. The Fannie Mae HomeStyle® Renovation loan is also an excellent product, and can provide the ideal solution in many cases where the 203(k) just doesn’t work.
Let’s explore a few of the many benefits of this flexible and progressive program:
Finance a home purchase and improvements.
The HomeStyle® Renovation mortgage allows home buyers to cover the cost of the property as well as the cost of repairs or updates with one first mortgage loan. There is a single closing which keeps loan expenses down, and all financing is arranged before work begins. Owner occupied, second home, and investments are eligible, with 30 year and 15 year fixed term options.
Available for refinancing as well as purchases.
Perfect for homeowners who want to make improvements or must make repairs but don’t have the equity for a traditional cash out refinance or equity line, as the loan to value is determined based on what the property will be worth once the work is complete, not before it’s started. Even when equity position makes a second mortgage an option, a renovation loan with a fixed rate may be preferable to a higher rate second or HELOC with an adjustable rate.
The cost of mortgage payments can be financed for up to six months.
What if the homeowner can’t live in the property throughout a large scale renovation? The HomeStyle® program provides a solution here too. In some cases it may be possible to borrow enough to cover the mortgage payment (including principal and interest, taxes and insurance) for up to six months. This frees up funds to pay for alternate housing until the home is habitable.
Homeowner has the freedom to choose the contractor.
The lender must approve the general contractor who will perform the work, but it is the borrower who chooses this professional. This gives the homeowner more control to find someone who is highly recommended, whose previous projects they admire, who understands and respects their budgetary constraints, and with whom they feel they will have a strong working relationship. This can make a huge difference in the success of a renovation project, large or small.
Wide list of approved improvements.
Some renovation mortgages place many restrictions on the projects that can be financed. With the HomeStyle® program the improvements must add value to the property, but there is a very large list of eligible items. Some of these include additions, finishing a basement, large landscaping improvements, room remodels, and structural repairs. Even luxury items such as installation of swimming pools, outdoor fireplaces, or tennis courts may be approved.
Expand your business by offering a way for homeowners with low equity to turn their current home into their dream home. Learn more about renovation loans and the Fannie Mae HomeStyle® program by visiting https://www.afrwholesale.com/resources/program-fact-sheets/
Photography by [Artazum] © shutterstock.com
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