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10/5/2015
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Understanding the benefits and process of a Residential Renovation
Loan for Realtors
Renovation financing allows a borrower to Purchase or Refinance a home in less than ideal condition and make the improvements immediately after closing.
A Sale may close with some or NONE of the Utilities/Systems on prior to closing !!
The cost of the renovation is rolled typically into a 30 year mortgage making it very affordable.
Homebuyers: Can purchase homes in less
than ideal condition (as‐is) and address the problems immediately after closing.
Homeowners: May upgrade/modernize or
expand to increase value ( to stay in or list for resale)‐ Love it or List it ! . Equity loans are very hard to get and credit cards are too expensive.
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Real Estate agents: Sell dated and properties needing repairs by helping potential buyers envisioning remodeling possibilities. ……….
Sell a Vision‐ what it could be, not what it is. Let the buyer create their Dream Home now.
Negative Listing notes: REO’s, Short Sales, HUD properties, “as‐is”, cash only, CO responsibility of buyer.
All can be financed with a Renovation loan easily
.
Second Home owners and buyers: Can take advantage of the program.
Investors can purchase homes in need of
repairs, not limiting them to pay cash (this makes it possible for you to sell more units to an Investor freeing up capital to make multiple sales). They can also upgrade a property they own for increased rent rolls or to list for resale.
When Selling or Listing a property
where the need for repairs is
obvious……
When you have an Appraisal with
repair conditions subject to final
inspection, prior to closing.
When you want to sell Vision !
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e appraiser must use their good judgment not to recommend
inspec ons only as a means of limi ng liability. e reason or indication of a particular problem
must be given when requiring an inspection of any mechanical system, structural system, etc.
The appraiser must use their good judgment when identifying MPR deficiencies that require repair. Per HUD Appraisal Handbook 4150.2 “Appraisers are reminded not to recommend inspections only as a means of limiting liability. The reason or indication of a particular problem must be given when requiring an inspection of any mechanical system, structural system, etc.
Structure • Missing siding (structure open to elements)
• Damaged/missing attached garage door (security- possible unobserved entry to home
• Bowing, crumbling foundation (structure compromised -recommend inspection)
• Significant foundation cracks (Do not list minor above grade typical step cracks)
Missing or broken windows (security safety) AZ and NV require reglazing
• Any exposed sub flooring (hardwood flooring is a floor covering)
• Missing kitchen base cabinets and
counter tops as required
accommodate sink and plumbing
fixtures (lower base cabinetry only)
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• Security bar removal (if no release latch is found)(lf latches present appraiser must comment)
• Grading/drainage issues (standing water against the foundation or obvious grade issues)
• Dampness/standing water in
basement or crawlspace
(indicate cost to remediate
standing water) determine
source if possible
• Mold like substances ( Remediate as needed)
Missing exterior doors or exterior doors that cannot be properly secured (excluding storm doors)
Damaged interior walls (larger areas or damaged walls that exMissing exterior doors or exterior doors that cannot be properly secured (excluding storm doors)
Damaged interior walls (larger areas or damaged walls that expose mechanical systems (do not include minor damage to drywall)
Major cracks in walls floors or foundation that indicate more than typical settlement or possible major structural issues
Removal cost for non conforming second kitchen in single family home
pose mechanical systems (do not include minor damage to drywall) Major cracks in walls floors or foundation that indicate more than typical
settlement or possible major structural issues Removal cost for non conforming second kitchen in single family home
LIST OF COMMON mpr repairs Missing exterior doors or exterior doors that cannot be properly secured (excluding storm doors)
• Damaged interior walls (larger areas or damaged
walls that expose mechanical systems (do not
include minor damage to drywall)
• Major cracks in walls floors or foundation that
indicate more than typical settlement or
possible major structural issues
• Removal cost for non conforming second kitchen in single family home
Roof • Leaking roof- Any evidence of
water leak (prior and/or
current)(if roof appears in
good condition recommend
inspection)
• Visibly worn or curling
shingles- roof at end of
useful life -no less than 2
years- (no more than 3 layers)
• Fascia- Missing, damaged, rotting (exposure to elements)
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• Gutters- Loose or Missing (possible drainage issues)
• Downspouts- Loose damaged or missing- possible drainage issues
Plumbing • Burst, missing, severed/frozen lines, Low pressure, no pressure (PCR or appraisers observation)
• Major leaks • Missing sink(s) • Missing water heater • Damaged relief valve(s) (water heater) • Damaged or missing sink and tub fixtures,
Electrical • Missing switch and outlet cover plates- (exposure to electrical contact)
• Non-working outlets -as indicated by the PCR
• Exposed/severed wires that
are not capped (capped but
hanging and exposed wires
should be reported to the
FSM)
• Missing /Damaged electrical service panel
• Missing/damaged electrical service meter
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HVAC Inoperable Furnace‐ Repair or replace as needed (if inoperable due to missing thermostat, cost to replace thermostat if furnace appears in good condition make the extraordinary assumption that with the thermostat repair the furnace is operational
• Missing furnace -Replace as needed • Missing/damaged thermostat • Missing or damaged Duct work • Missing vent registers (wall or floor vents)
• Boilers that were not tested by
FSM due to water shut off
must be inspected for safe
operation. (recommend
inspection)
• Missing boiler supply or return lines. • Missing air conditioning units
may be a repair item in some
contract areas with warmer
climates while some contract
areas consider them a luxury
item. Contact your appraisal
specialist for guidance
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Misc • Evidence of hazardous material on or in the improvements
• Evidence of underground storage tanks
• 1970’s FHA 203k (Full)
– 1990’s Fannie Mae• HomePath® & HomeStyle®
– 2000’s FHA 203k Streamline
…..HHistory of the programs 1970’s FHA 203k 1990’s Fannie Mae HomePath® & HomeStyle®
2000’s FHA 203k Streamline
Mostmortgagefinancingplansprovideonlypermanentfinancing.Thatis,thelenderwillnotusuallyclosetheloanandreleasethemortgageproceedsunlesstheconditionandvalueofthepropertyprovideadequateloansecurity.
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Most mortgage financing plans provide only Mostmortgagefinancingplansprovideonlypermanentfinancing.Thatis,thelenderwillnotusuallyclosetheloanandreleasethemortgageproceedsunless theconditionandvalueofthepropertyprovideadequateloansecurity.gefinancingplansprovideonlypermanentfinancing.Thatis,thelenderwillnotusuallyclosetheloanandreleasethemortgageproceedsunlesstheconditionandvalueofthepropertyprovideadequateloansecurity.
financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security.
Whenrehabilitationisinvolved,thismeansthatalendertypicallyrequirestheimprovementstobefinishedbeforealong‐termmortgageismade.Thisisanissueoftenespeciallyonan“As‐Is”Contract.
When a homebuyer wants to purchase a
house in need of repair or
modernization, the homebuyer usually
has to obtain financing first to purchase
the dwelling; additional financing to do
the rehabilitation construction; and a
permanent mortgage when the work is
completed to pay off the interim loans
with a permanent mortgage.
Often the interim financing (the
acquisition and construction loans)
involves relatively high interest rates and
relatively short amortization periods.
The Section 203(k) program was
designed to address this situation.
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The borrower can get just one mortgage
loan, at a long‐term fixed (or adjustable)
rate, to finance both the acquisition and
the rehabilitation of the property. To
provide funds for the rehabilitation, the
mortgage amount is based on the
projected value of the property with the
work completed, taking into account the
cost of the work.
ELIGIBLE PROPERTY.
To be eligible, the property must be a
one‐ to four‐family dwelling that has
been completed for at least one year.
The number of units on the site must be
acceptable according to the provisions of
local zoning requirements.
Homes that have never been completed
cannot be accepted into the 203(k)
program; construction of the property
must have been completed for at least
one year. Evidence of completion would
be a Certificate of Occupancy or other
similar documentation from the local
jurisdiction.
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Homes that have been demolished, or
will be razed as part of the rehabilitation
work, are eligible provided the existing
foundation system is not affected and
will still be used. Part of the foundation
system must remain in place.
A report from a licensed structural
engineer is required stating that the
existing foundation is structurally sound
and capable of supporting the proposed
construction of the dwelling. It may be
modified
In addition to typical home rehabilitation
projects, this program can be used to
convert a one family dwelling to a two,
three, or four‐family dwelling. An
existing multi‐unit dwelling could be
decreased to a one‐ to four‐family unit
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An existing house on another site can be
moved onto the mortgaged property;
however, release of loan proceeds for
the existing structure on the non‐
mortgaged property is not allowed until
the new foundation has been properly
inspected and the dwelling has been
properly placed and secured to the new
foundation.
HOW THE PROGRAM CAN BE USED.
This program can be used to accomplish
rehabilitation and/or improvement of an
existing one‐to‐four unit dwelling in one
of three ways:
A. To purchase a dwelling and the
land on which the dwelling is
located and rehabilitate it.
B. To purchase a dwelling on another
site, move it onto a new
foundation on the mortgaged
property and rehabilitate it.
C. To refinance existing indebtedness
and rehabilitate such a dwelling.
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The Full 203k is very similar to the 203k Streamline. There a
The Full 203k is very similar to the 203k Streamline. There are only a couple key differences with this loan product.
e on• Any Structural Repairs. Something as big as jacking up your house to replace the sill plate falls under the Full 203k. Moving or altering a load bearing wall. So would knocking the house down to rebuild it, as long as you leave part of the existing foundation.
y a cCost. The Streamline is $35,000 MAX (Line B14 on the Maximum Mortgage Worksheet). If your repairs and renovations go above $35,000 then you need to get into a Full 203k loan.
HUDHUD Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write-up before the appraisal Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write‐up before the appraisal le key differences with this loan product.
• Structural Repairs. Something as big as jacking up your house to replace the sill plate falls under the Full 203k. So would knocking the house down to rebuild it, as long as you leave the foundation. • HUD Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write‐up before the appraisal. • Cost. The Streamline is $35,000 MAX (Line B14 on the Maximum Mortgage Worksheet). If your repairs and renovations go above $35,000 then you need to get into a Full 203k loan.
The Consultant’s first task during the loanprocess is to perform an initial propertyinspection.
If the homeowner is unfamiliar with repairsrequired by FHA guidelines, they should involvethe Consultant as soon as possible (MPR items) If the borrower has a good grasp of what isneeded, the Consultant can be brought in after thecontractor has submitted bid(s).
The Consultant’s role is to review and verify the accuracy of the contractor’s estimates and ensure that all required repairs are completed.
The Consultant is also responsible for overseeing the draw process
If the borrower is not happy with the quality of the work, the Consultant will request that the contractor correct any issue prior to payment.
The Consultant’s role is to review and verify theaccuracy of the contractor’s estimates and ensurethat all required repairs are completed. The Consultant is also responsible for overseeingthe draw process
If the borrower is not happy with the quality ofthe work, the Consultant will request that thecontractor correct any issue prior to payment.
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Any changes to the original plans, cost overruns and use of the Contingency Reserve must be approved by the Consultant.
Any changes to the original plans, cost overrunsand use of the Contingency Reserve must beapproved by the Consultant.
REPAIR AMOUNT CONSULTANT FEE
$0 - $7,500 $400 $7,501 - $15,000 $500
$15,001 - $30,000 $600 $30,001 - $50,000 $700 $50,001 - $75,000 $800 $75,001 - $100,000 $900
$100,000 and up $1,000
$25 added for each unit over the 1st ($75
max)
$25
ELIGIBLE IMPROVEMENTS. (Full 203k)
Mortgage proceeds must be used in part
for rehabilitation and/or improvements to a
property. There is a minimum $5000.00
requirement for the eligible improvements
on the existing structure on the property.
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The mortgage must include one or more of
the items listed below, with a cumulative
minimum of $5,000.
A. Structural alterations and
reconstruction (e.g., additions to the
structure, finished attics, repair of
termite damage and the treatment
against termite infestation, etc.)
B. Changes for improved functions and
modernization (e.g., remodeled
kitchens and bathrooms).
C. Elimination of health and safety
hazards (including the resolution of
defective paint surfaces and/or lead‐
based paint problems on homes built
prior to 1978).
D. Changes for aesthetic appeal and
elimination of obsolescence (e.g., new
exterior siding).
E. Reconditioning or replacement of
plumbing (including connecting to public
water and/or sewer system), heating, air
conditioning and electrical systems.
F. Roofing, gutters and downspouts.
G. Flooring, tiling and carpeting.
H. Energy conservation
improvements (e.g., new double
pane windows, insulation, solar
domestic hot water systems, etc.).
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J. Major landscape work and site
improvement, patios and terraces
that improve the value of the
property equal to the dollar amount
spent on the improvements or
required to preserve the property
from erosion.
K. Improvements for accessibility to
the Handicapped.
When basic improvements are involved, the
following costs can be included in addition
to the minimum $5,000 requirement for the
existing structure:
Construction or rehabilitation of a detached
garage or an attached unit(s) to the existing
dwelling (if allowed by the local zoning
ordinances).
‐ New cooking ranges, refrigerators and
other appurtenances
(Used appliances are not eligible).
‐ Interior or exterior painting.
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Luxury items and improvements that do not
become a permanent part of the real
property are not eligible as a cost
rehabilitation. The items listed below (not
limited to this list) are not acceptable under
the 203(k) program, including the repair of
any of the following:
Barbecue pits; bathhouses; dumbwaiters;
exterior hot tubs, saunas, spas and
whirlpool baths; outdoor fireplaces or
hearths; photo murals; swimming pools;
television antennas and satellite dishes;
tennis courts; tree surgery. Additions or
alterations to provide for commercial use
are not eligible.
A. Insurance of advances. This refers to
insurance of the mortgage prior to
the rehabilitation period.
A mortgage that is a first lien on the
property is eligible to be endorsed for
insurance following mortgage loan closing,
disbursement of the mortgage proceeds,
and establishment of the Rehabilitation
Escrow Account.
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The mortgage amount may include funds
for the purchase of the property or the
refinance of existing indebtedness, the
costs incidental to closing the transaction,
and the completion of the proposed
rehabilitation. The mortgage proceeds
allocated for the rehabilitation will be
escrowed at closing in a Rehabilitation
Escrow Account.
Rehabilitation Escrow Account. When the
loan is closed and Insurance of Advances is
used, the proceeds designated for the
rehabilitation or improvement, including
the contingency reserve, mortgage
payment reserve and monies retained
under the Escrow Commitment Procedure,
are to be placed in an interest bearing
escrow account insured by the Federal
Deposit Insurance Corporation (FDIC)
The lender (or its agent) will release
escrowed funds upon completion of the
proposed rehabilitation in accordance with
the Work Write‐up/Estimate and the Draw
Request. Release of funds for completed
work typically will not occur until one day
following loan closing.
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Streamline 203k allows up to 50% upfront
release of funds prior to work being started.
A final Inspection and title update will
commence when all work is completed,
followed by the release of the remaining
repair balance.
FullFull 203ks require that funds only be
released for work that has been performed
and inspected.
No upfront monies are released. There is a
maximum of 5 draws/Inspections per
project.
The final release of the escrowed
rehabilitation funds is to take place only
after the local jurisdiction has provided its
final acceptance of the work and the HUD
or the Direct Endorsement (DE) Underwriter
has reviewed the final Compliance
Inspection Report and the Draw Request
form. At this time the CO is delivered to the
Lender if applicable.
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The Final Release Notice can be issued,
authorizing the final payment, which may
include the interest earned on the escrow
account and the total of all holdbacks. This
Notice also directs the prepayment of the
mortgage by the amount remaining in the
contingency reserve and any unused
inspection fees or mortgage payments,
when applicable.
All inspections are performed by HUD‐
approved fee Inspector/HUD Consultant or
Appraiser assigned by the Lender. The
inspector is to use the architectural exhibits
in order to make a determination of
compliance or non‐compliance.
The HUD accepted Plan Reviewer (if used)
can be allowed to do the fee inspections on
the property, because he/she is already
familiar with the proposed improvements
and can inspect the rehabilitation knowing
what was accepted in the work write‐up.
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When the inspection is scheduled due to a
request for payment, the inspector is to
indicate on the Compliance Inspection
Report whether or not the work has been
completed. Also, the inspector must use the
Draw Request form.
The first draw must not be scheduled until
the lender has determined that the
applicable building permits have been
issued.
The inspection fees are paid by the
mortgagor, but, the lender is responsible to
ensure that payment is made to the
inspector. If the inspection fee is part of the
escrow, then it can be released along with
the release of the escrow funds as a result
of an acceptable Draw Request.
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A ten (10) percent holdback is required on
each release from the Rehabilitation Escrow
Account. The total of all holdbacks may be
released only after a final inspection of the
rehabilitation and issuance of the Final
Release Notice.
At the discretion of the Lender, the cost
estimate may include a contingency
reserve if the existing construction is
less than 30 years old or the nature of
the work is complex or extensive. A
contingency reserve is required when
there is evidence of termite damage or
previous termite infestation.
For properties older than 30 years the cost
estimate must include a contingency
reserve of a minimum of ten (10) percent of
the cost of rehabilitation; however, the
contingency reserve may not exceed twenty
(20) percent where major remodeling is
contemplated. If the utilities were not
turned on for inspection, a minimum fifteen
(15) percent is required.
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The reserve cannot be used to make
additional improvements to the dwelling
that are considered luxury items; however,
it may be used to pay for added
construction costs caused by deficiencies
(health, safety and necessity) discovered
during rehabilitation.
Any unused portion of the Contingency
Reserve Fund remaining at the time of
issuance of the Final Release Notice must
be applied to reduce the mortgage balance.
Work items cannot be deleted from the
rehabilitation if it will decrease the value of
the home, since the loan has already closed.
If the Borrower feels that the contingency
reserve will not be used and they wish to
avoid having the reserve applied to reduce
the mortgage balance after issuance of the
Final Release Notice, the borrower (or any
other person, organization or agency on the
borrower's behalf) may place their own
funds into the contingency reserve account.
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In this case, if monies are remaining in the
account after the Final Release Notice is
issued, the monies may be released back to
the borrower (or other person, organization
or agency who placed the money in the
contingency reserve).
If the mortgage is at the maximum
mortgage limit for the area or for the
particular type of transaction, but a
contingency reserve is required, the
contingency reserve must be placed into an
escrow account from other funds of the
borrower at closing.
Under these circumstances, if the
contingency reserve is not used, the
remaining funds in the escrow account will
be released to the borrower after the Final
Release Notice has been issued.
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Funds not to exceed the amount of six (6)
mortgage payments (including PITI and the
mortgage insurance premium) can be
included in the cost of rehabilitation and
deposited in the rehabilitation escrow
account to assist a mortgagor when the
property is not occupied during
rehabilitation.
The number of mortgage payments cannot
exceed the completion time frame required
in the Rehabilitation Loan Agreement. The
lender must make the monthly mortgage
payments directly from the interest bearing
reserve account.
Monies remaining in the reserve account
after the Final Release Notice is issued, or
occupancy of the property, must be used to
reduce the mortgage principal.
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Based on the lesser of:
1‐ The estimate of As‐is value or the
purchase price of the property
before rehabilitation, whichever is
less, plus the estimated cost of
rehabilitation and allowable
closing costs; or
110 percent of the expected market
value of the property upon
completion of the work plus
allowable closing costs.
The maximum mortgage amount is based
on 96.5/97.75 percent of the lessor of the
above.
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Expenses eligible to be included in the cost
of rehabilitation are materials, labor,
contingency reserve, overhead and
construction profit (put in each work item),
up to six (6) months of mortgage payments,
plus expenses related to the rehabilitation
such as permits, fees, inspection fees by a
qualified home inspector (i.e., a member of
the American Society of Home Inspectors),
licenses, inspection fees during construction
by a HUD accepted Consultant/Inspector,
lien protection fees for title updates and
architectural/ engineering fees.
The cost of rehabilitation may also include
the Supplemental Origination Fee which the
mortgagor is permitted to pay when the
mortgage involves insurance of advances,
and the discounts which the mortgagor will
pay on that portion of the mortgage
proceeds allocated to the rehabilitation.
A mortgage is eligible for an increase of up
to 20 percent in the maximum insurable
mortgage amount, if such an increase is
necessary for the installation of solar
energy equipment. The solar energy
system's contribution to value will be
limited by its replacement cost or by its
effect on the value of the dwelling.
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Overview
Style Renovation mortgage enables a borrower to obtain a purchase transaction
mortgage or a limited cash‐out refinance mortgage and receive funds to cover the costs of
repairs, remodeling, renovations, or energy improvements to the property. The mortgage may
be delivered to Fannie Mae prior to completion of the renovation, subject to limited recourse as
described below.
Overview The HomeStyle Renovation mortgage enables a borrower to obtain a purchase transaction mortgage or a limited cash-out refinance mortgage and receive funds to cover the costs of repairs, remodeling, renovations, or energy improvements to the property
There are no required improvements or restrictions on the types of repairs allowed or a minimum dollar amount for the repairs, however, must be permanently affixed to the real property and add value to the property.
Renovation-related costs that may be considered as part of the total renovation costs include: property inspection fees; costs and fees for the title update; architectural and engineering fees; independent consultant fees; costs for required permits; and other documented charges, such as fees for energy reports, appraisals, review of renovation plans, and fees charged for processing renovation draws.
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The security property for a HomeStyle Renovation Mortgage must be: a one- to four-unit principal residence a one-unit second home, or a one-unit investment property.
Max Loan To Value (LTV)
• Purchase 95% Owner Occ. (SFR only) • Purchase 85% Owner Occ. (2 units) • Purchase 75% Owner Occ. (3-4 units) • Purchase 90% Second Home (SFR only) • Purchase 80% Investor (SFR only) • Purchase 90% Second Home (SFR only)
• Purchase 80% Investor (SFR only)
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A HomeStyle Renovation Mortgage may be either a fixed-rate mortgage or an ARM loan. The original principal amount of the mortgage may not exceed Fannie Mae’s maximum allowable mortgage amount for a conventional first mortgage. Fannie Mae provides HomeStyle Renovation Maximum Mortgage Worksheet, to assist lenders in calculating the maximum loan amount. The cost of renovations is limited to 50% of the “as completed” appraised value of the property.
• The loan amount is based on LTV derivedfrom lesser of:
• TOTAL acquisition cost including allconstruction related expense
• Or from the “as completed” value of the home
Fannie Mae limits the number of residential properties the borrower may currently be financing to four properties, including his or her principal residence. This limitation is based on the total number of properties financed, not just the number of mortgages sold to Fannie Mae or the number of HomeStyle mortgages sold.
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Joint ownership in residential real estate is considered the same as total ownership of an individual property. The four-property limit applies to any combination of ownership in one- to four-unit properties, whether or not the financing involves a HomeStyle product.
For example, a borrower may own four single-family properties; two two-family properties and two single-family properties; one co-borrower may own one single-family property and the other co-borrower may own three two-family properties; a borrower may own four four-family properties; etc.
The appraisal report for a HomeStyle Renovation Mortgage must provide an “as completed” appraised value that estimates the value of the property after completion of the renovation work.
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All renovation work must be performed by a
licensed contractor. A borrower must choose
his/her own Contractor to perform the needed
Renovations, subject to the lender’s determination
that the contractor is qualified and experience. The
contractor must have all appropriate Licenses and
Insurance as required by the State and or
municipality they are in.
The plans and specifications must be prepared by a registered, licensed, or certified general contractor, renovation consultant, or architect. The plans and specifications should fully describe all of the work to be done and provide an indication of when various jobs or stages of completion will be scheduled (including both the start and completion dates).
The lender must use the plans and specifications to document and evaluate the quantity, quality, and cost of the renovation work that is to be done and to determine the amount of financing that will be available. These plans and specifications also must be used by the appraiser in the development of his or her opinion of the “as completed” value of the property.
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The costs of the renovations will be based on the plans and specifications for the work and on the contractor’s bids for all of the work requested by the borrower. The renovation costs may include a contingency reserve, renovation-related costs, and an escrow for mortgage payments that come due during the renovation period, if the borrower is unable to occupy the property during the renovation.
The construction contract must: itemize the specific work that the contractor agrees to perform for the borrower, state the agreed-upon cost of the renovation, identify all subcontractors and suppliers, include an itemized description that establishes the schedule for completing each stage of the work and the corresponding payments to be made to the contractor.
This contract, which must be executed by both the contractor and the borrower, should also require the contractor to: be duly licensed (if required by applicable law); obtain all required insurance coverages (such as all-risk, public liability, workmen’s compensation, and automobile liability); complete the work in compliance with the contract and all applicable government regulations (such as building codes and zoning restrictions);
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obtain the necessary building permits (including a certificate of occupancy, if required); provide for appropriate remedies for resolving disputes (including an agreement to indemnify the borrower for all property losses or damages caused by the contractor’s employees or subcontractors).
Borrower contacts a Renovation specialist: loan options are discussed and preapproval decision is made.
FNMA /Conventional vs. FHA/Government. (Possibly adding the words 203k or Homestyle)
Contract of Sale is written (Purchase)/using actual sales price, type of financing and down payment % off of the Sales price, loan amount is Sales price minus down payment…They same way you normally write it up….. No Sweat !
Work write up/estimate –Contractor or HUD Consultant submits to the Lender. ( 1‐2 weeks from Contact acceptance)
Appraisal is ordered with the Estimate to Maximize value (After Improved Value)
Finalize commitment and clear conditions if any.
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Loan closes/funds prior to any work beginning.
Repairs funds are held in an escrow account and disbursed base on specific loan guidelines… (usually after an inspection/up to 5 draws).
Be sure your borrower deals with a Lender who administers the draws directly to avoid payment delays.
rBBuyers expect much more today,
yet most agents haven’t re-tooled or systematized their buyer processes to deliver that "value-added" service that buyer’s demand
Discussing Renovation programs is an “added Value” service.
Using a Renovation Loan actually adds value ($$$$)
s
r that "value‐added" service that buy
Attract more potential buyers, those looking for “fixer uppers” Owner Occupants and First time Investors are out there, use these products to increase your Sales/Listings.
Overcome buyers cosmetic objections (Vision) –
‐‐–
‐‐‐‐‐‐‐How many hours have you spent driving homebuyer from listing to listing ?
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The perfect Loan Product for properties being sold “AS‐IS”‐REO and short sales.
Realtors are paid when the loan closes, not after repaired
Increases your referral base utilizing niche products (Buyers selling you by word of mouth about immediate equity (at times) and the newer beautiful home)
When its time to re‐list, the property is already updated
Wouldn’t be nice to re‐List the home in 2020 already updated instead of you having to List a REALLY outdated listing (Its your headache now)
• Remodeling market totaled nearly $298 Billion in 2013
• Estimated to grow at an annual rate of 3.5% from 2013 to 2015
• Median age of housing stock is currently 37 years +account
• Homes account for over 22 percent of national energy usage, and about half of the national housing stock was build before 1973.
• Median square footage of new homes today is 2,280, compared to 1,595 for homes built in the 1980s
Median square footage of new homes today is 2,267, compared to 1,595 for homes built in the 1980s
Remodeling market totaled nearly $286 Billion in 2009 Estimated to grow at an annual rate of 3.5% from 2011 to 2015 Median age of housing stock is currently 35 years +
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• Trade-up buyers spend 22% more on home improvements than first time homebuyers– Income bracket: 80K to 120K
• Expenditures by category:– Kitchens - $16– Baths - $11– Additions/alterations - $28– Systems - $23– Replacements - $44
(2013 in Billions) Homes account for over 20 percent of national energy usage, and about half of the national housing stock was build before 1973. Median square footage of new homes today is 2,267, compared to 1,595 for homes built in the 1980s
• Return based on type of improvement: –Bath 64%–Kitchen 69%–Master Bedroom 63%–Basement 70%–Deck 73%
(National Average) Return based on type of improvement:
Bath 64% Kitchen 69% Master Bedroom 63% Basement 70% Deck 73%
mortgage program takes too long to close! mortgage program takes too long to close!Renovation Loans are hard to do and
complicated
Not True: It all comes down to the people that are
involved in the process
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This type of loan takes too long to close
A Renovation loan does have a few more steps
but should take no longer than 30 days to close
https://encrypted‐tbn1.gstatic.com/images?q=tbn:ANd9GcQmUaom1CLQB9vBC8rwzisYJPHGDncqggiWCLn9ryH5CMnfvOY7
Instructor will ask several oral questions to the
attendees ‐
So to ascertain a basic understanding of the
Renovation Loans covered ‐
Guidelines and Benefits to them and their
buyers by a show of hands.
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This educational presentation was presented by:
May Renovation be your Inspiration
Movement Mortgage
Movement Mortgage, LLC is an Equal Housing Lender. NMLS ID# 39179 (www.nmlsconsumeraccess.org) | 877‐314‐1499. Movement Mortgage, LLC islicensed by AK # AK39179, AL # 21022, AR # 105002, AZ # 918544, “CA Department of Business Oversight under the California Residential MortgageLending Act” # 4131054, "CO Regulated by Division of Real Estate", CT # ML‐39179, DE # 012644, DC # MLB39179, FL # MLD200, GA # 23002, ID # MBL‐8027, "Illinois Residential Mortgage Licensee" # MB.6760898, IN # 18121, IA # 2013‐0023, “Kansas Licensed Mortgage Company” # SL.0026458, KY #MC85066, LA, MD # 19094, MA Banker & Lender # MC39179, MI # FL0018132, MN # MN‐MO‐39179, “Mississippi Dept of Banking and Consumer Finance"# 39179, MO # 13‐2096, NV # 3402/3401, “NJ Department of Banking and Insurance", NC # L‐142670, ND # MB102519, OK # ML002646, OR # ML‐5081, PA# 34374, SC # MLS‐39179, SD # ML.05007, TN # 112748, TX, VA # MC‐5112, WA # CL‐39179, WV # MB‐32019/ML‐32020, and WI # 39179. Interest rates andproducts are subject to change without notice and may or may not be available at the time of loan commitment or lock‐in. Borrowers must qualify atclosing for all benefits. “Movement Mortgage” is a registered trademark of the Movement Mortgage, LLC, a Delaware limited liability company. 841Seahawk Cir, Virginia Beach, VA 23452.
