Renovation Mortgage from Fannie Mae
The HomeStyle® Renovation Mortgage lets you buy a home and repair or improve it with just one loan. You can also use it to refinance an existing mortgage to fund improvements or repairs to the home you currently own. The loan amount used for renovation may be as much as 50 percent of the as-completed appraised value of the home.
Key Features
For home purchases, you can borrow more than the current value of the home -- the loan amount is based on the lesser of either the project costs or the "as-completed" value of the property, up to 95% loan-to-value for one-unit, owner-occupied properties.
A first-mortgage interest rate is applied, which is lower than the home equity or second mortgage rates typically associated with home improvement financing.
Virtually any type of improvement or repair is eligible.
This mortgage is available for one- to four-unit primary residences and one-unit second homes or investment properties, including condominiums.
You can choose a fixed-rate mortgage with terms of 15 to 30 years or an adjustable-rate mortgage (ARM).
You can finance up to six months of mortgage payments for owner-occupied properties to cover non-occupancy costs during construction. For example, if you have to spend six months renting an apartment while your home renovation takes place, you can roll those expenses into your loan amount.
It's a great loan for investors -subject to being able to fully disclose their income, total number of properties owned, and if a general contractor is required. Most of my investors can't qualify for this loan (I'm a mortgage broker).
kdxhx, what are the general requirements for the program, income ratios, credit score, etc?
Martin
It would be difficult to give a specific credit score or DTI because both Fannie and Freddie place borrowers in these products with their own computer scoring system. So depending on credit score, assets, income, number of other properties, credit history, you might be approved with a higher than normal debt ratio, with a very high credit score and substantial assets. In general, if you are below 620 on middle credit score, you probably won't get a FNMA /FHMLC rehab loan; if you are above 45-50% debt ratio without strong compensating factors, you probably can't get a rehab loan. You want to be above 680 on score and below 40 on DTI. The biggest problem with true investors is that rent /flips is their only income and it only stands to reason that they will write off as much income as they can on income taxes. Additionally, there aren't as many products that cater to a no-income or stated income clientele such as investors; and given the higher risk factor for a non-owner occupied property, you have only a small number of lenders with a limited number of programs to work with. My clientele is 90% investors, and my job is to find those programs. There are no limited documentation rehab loans for investors that I am aware of that come close to a Fannie/Freddie rate/LTV. Sometimes you can get a local bank to work with you on this. I have one here in Pensacola, Florida that will. You may have to prove yourself to them to get the LTV/terms that you desire... I usually refinance my clients out of those short terms loans into something lower rate and longer terms...sometimes with cash out.
Anyone have any specific contact info at FM that should be used to apply for this?
What credit score and DTI are required?
The guidelines are the same as conventional financing guidelines. Freddie Mac also has a similar product, but the loan amount used for renovation may be as much as 75 percent of the as-completed appraised value of the home. I know both products are offered through Accubanc/National City and any good broker will have access to these products. If anyone has any specific questions regarding guidelines just ask.