FNMA HomeStyle mortgages enable people to include the expense of renovation into the financing. It can be used to purchase a new property or to refinance a current one. It may apply to minor and major tasks and thus is a great alternative for houses requiring extensive work. This overview of HomeStyle mortgages includes key facts.
Types Of Properties Suitable For FNMA HomeStyle Mortgages
FNMA HomeStyle mortgages may apply to a wide range of homes, although there are some restrictions. Single family properties are typically approved. Condominiums must be approved by Fannie Mae and only interior renovation qualifies. Multi-family homes are allowed but the number of units must not increase or decrease from the renovation. Property types that will not be permitted are mixed use homes, new construction, cooperatives, and multi-family properties that do not intend to be utilized as a primary home.
Limits And Terms
There are two different approaches to calculating value. First is the “as-completed” value of the home determined by a professional appraisal. The second is the purchase price of the property added to the total cost of repairs. The lower of these is used to identify the loan-to-value (LTV) ratio. This determines the amount loaned.
The acceptable LTV is set using the type of home. For real estate that is occupied as a primary home, 95% is the maximum for single family homes, 85% for buildings with 2 units, and 75% for buildings with 3 to 4 units. Second homes are maxed at 90% and single family investment real estate 85%. Cash out is not approved for these mortgages.
How Rehabs Are Treated
Rehab contracts must be reviewed for mortgage approval. All estimates must include comprehensive details on the work, labor and material costs. Money for the repairs are placed into an escrow account at closing and paid out as work is finished. Specific paperwork must be submitted by every contractor. Borrowers may not obtain pay for work completed on their own. All rehabs must be done within 6 months of closing.
Overview Of HomeStyle Mortgages
This overview of HomeStyle mortgages covers only some of the most common questions about FNMA HomeStyle mortgages. Additional terms and criteria apply. This information is also likely to change without notice. Consult with a mortgage consultant for further facts and to assess whether it is feasible for you.