There are numerous reasons to utilize a renovation loan. We're here to help!
• The Standard 203(k) (sometimes referred to as the Consultant K or Original K) is intended for more complicated projects that involve structural changes such as room additions, exterior grading and landscaping, or renovation that would prohibit you from occupying the residence. A Standard 203(k) is also used if your project requires engineering or architectural drawings and inspections. Under this program a single family property may be converted into a two, three or four-unit dwelling or vice versa so long as the owner occupies one of the units.
• The Streamlined 203(k) is designed for less extensive improvements and for projects that will not exceed a total of $35,000 in renovation and related expenses. This version does not require the use of a consultant, architect, and engineer or as many inspections as the Standard 203(k). As a result, when applicable, the Streamlined 203(k) generally becomes the simpler, less costly option.
Once the homebuyer finds a property to purchase, the process of obtaining a loan insured under the provisions of the 203(k) program begins in earnest. The mortgage must be the first lien on the property being improved.
The maximum mortgage amount allowable under the 203(k) program is the lesser of:
▪ The as-is value or the purchase price of the property before rehabilitation, whichever is less, plus the estimated cost of rehabilitation; or 110% of the after-improved value of the property FHA 203k Features and Benefits
▪ Rather than paying a premium for a home in “perfect” condition, buyers can take advantage of discounted prices available on foreclosures or other homes on the market that are in need of repair or remodeling
▪ Instead of paying for a previous owner’s improvements, 203(k) allows the buyer to renovate the home adding the features, colors, styles, etc. that suit their tastes and needs
▪ Using the program could allow a buyer to purchase more home for the money in a more desirable location
▪ Only a 3.5% down payment is required, which can be gifted by family members
▪ Renovation costs are wrapped into the mortgage, allowing the borrower to pay for the improvements over time at a much lower interest rate than conventional alternatives
▪ More flexible qualification requirements allow buyers with less than perfect credit to purchase a home at competitive rates
▪ A single loan for the purchase and improvement of the home means only one loan application and one set of closing costs – saving both time and money
▪ Can be used for either a purchase or refinance along with renovation costs
▪ 15 and 30 year loans are available
▪ Interest rates can be variable or fixed
▪ FHA loans are assumable with no prepayment penalties
▪ An FHA Energy Efficient Mortgage (EEM) allows the borrower to qualify for a larger mortgage to add improvements that will lower utility expenses
What improvements are eligible under the Streamlined 203k?
The Streamlined 203k program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required.
This program allows discretionary improvements and/or repairs shown below:
▪ Repair/replacement of roofs, gutters and downspouts
▪ Repair/replacement/upgrade of existing HVAC systems
▪ Repair/replacement/upgrade of plumbing and electrical systems
▪ Repair/replacement of flooring
▪ Minor remodeling, such as kitchens, which does not involve structural repairs
▪ Painting, both exterior and interior
▪ Weatherization, including storm windows and doors, insulation, weather stripping, etc.
▪ Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
▪ Accessibility improvements for persons with disabilities
▪ Lead-based paint stabilization or abatement of lead-based paint hazards
▪ Repair/replace/add exterior decks, patios, porches
▪ Basement finishing and remodeling, which does not involve structural repairs
▪ Basement waterproofing
▪ Window and door replacements and exterior wall re-siding
• HomeStyle Loan This loan is to be used on conventional loans for both appraiser-required repairs and repairs the borrower wants done to the property.
It can be used on second homes and investment properties.
The repairs can be structural in nature or cosmetic, but they must be attached to the property and add value.
Benefits Of Fannie Mae HomeStyle Loan
With the HomeStyle loan, the minimum loan amount is $50,000 and the maximum loan amount is in reference to the conforming loan limit ($471,000).
Repairs and renovations must be completed within 6 months and cannot exceed 50% of the after improved appraised value.
With the Fannie Mae HomeStyle loan, there are many benefits that a homebuyer can reap such as: • Qualifying for the loan based on the as-completed value of the property.
• Many borrowers are able to take advantage of low first mortgage interest rates and are able to do numerous types of improvements or repairs in their desired home of purchase.
• Finance mortgage payments up to 6 months to cover any non-occupancy costs during construction.
• With the lender involved in the construction oversight and monitoring, it can provide added value to borrowers.
Eligible Fannie Mae Homestyle Properties:
• 1-4 unit newly built or constructed (attached/detached).
• 1-unit manufactured homes.
• 1-4 unit existing site-built home (attached/detached).
• Approved (Fannie Mae-warrantable) Condominiums, Cooperative, and PUD units.
The Fannie Mae HomeStyle loan is available for purchase of primary residence, a second home, or investment property.
*HomeStyle® is a registered trademark of Fannie Mae.
Give us a call for further details at (763)-201-8216!