Our fastest growing loan programs are "renovation" loans which allow a borrower to finance improvements into a single loan when purchasing or refinancing a home. There are two main types of renovation loans; FHA 203k and Fannie Mae Home Style. The details are below.
Fannie Mae Home Style
The HomeStyle Renovation is a single-close loan that enables borrowers to purchase a home that needs repairs, or refinance the mortgage on their existing home and include the necessary funds for renovation in the loan balance. The loan amount is based on the "as completed" value of the home rather than the present value.
The maximum loan to value is 95% of the project cost or appraised value - which ever is less. The maximum loan amount is equal to the conforming maximum loan amount per the county in which the subject property is located. Renovation costs are limited to 50% of the "as completed" appraised value of the home and may include labor and materials, soft costs, and a contingency reserves of 10%.
FHA 203k Rehabilitation Loan
This special type of FHA insured mortgage allows buyers to acquire and rehabilitate homes and are subject to, in general, the same requirements as standard 203b FHA loans. The buyer is typically able to finance all or a portion of the cost to rehabilitate the home. The minimum down payment is 3.50% of the purchase price plus rehabilitation cost (specific down payment requirement is determined by a maximum mortgage calculator).
There are 2 types of FHA 203k loans. Please see below and contact F&B Financial Group with any questions or concerns.
FHA's Streamlined 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser. Homeowners can make property repairs, improvements, or prepare their home for sale. Homebuyers can make their new home move-in ready by remodeling the kitchen, painting the interior or purchasing new carpet
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.