The FNMA HomeStyle conventional mortgage allows a buyer to purchase a home that needs renovations and include them in the financing. This facilitates the purchase of the home and the renovations in one loan rather than getting a separate second mortgage or home equity line of credit.
The combination of these loans should save closing costs as well as interest rates which would typically be higher on a home improvement loan.
The borrower will need to have an itemized, written bid from a contractor covering the scope of the improvements. Any type of renovation or repair is eligible if it is a permanent part of the property. Improvements must be completed within 12 months from the date the mortgage loan is delivered.
Up to 50% of the renovation funds may be advanced for the cost of materials after the closing of the loan.
This mortgage does have a provision for the borrower to do a portion of the work themselves if it doesn't exceed 10% of the total project and it must pass inspection on completion just as the contractor's work.
It is recommended that borrowers thoroughly research this program before they commit to a loan.
For detailed information, see FNMA HomeStyle Renovation Mortgage and Selling Guide Announcement SEL-2017-02.
It is important to work with a mortgage officer who is familiar with these loans who can guide you through the process.
Source: Better Homeowners/used with permission
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Paul Matadeen and Better Homeowners do not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Paul Matadeen and Better Homeowners. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.