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Posts Tagged ‘Renovations’

The Basics | Renovation Loans

Written by Clay on . Posted in Renovation Loans

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A Renovation loan can be used to purchase a home or refinance an existing home. A HomeStyle Renovation Loan from Signet can be used to improve an investment property too!  A renovation loan based on the improved value of your home making it a valuable alternative to a construction loan. You can arrange for funds over and above the purchase price of your new home to remodel, make repairs or add a room! A refinance will pay off your existing loan, and provide additional funds for a wide range of improvements – let your imagination go! A renovation loan is a perfect way to fix up a property, or add that extra bedroom you need for your growing family.

There are several basic types of Renovation Loans. HomeStyle loan from Fannie Mae is my favorite, as it allows loan-to-value to 95%, does not have up-front mortgage insurance and is underwritten to standard Fannie Mae guidelines.  The loan is based on the improved value of your home AFTER completion – so you will have the resources to make it your dream home! FHA 203(k) loans come in two “flavors” …
  • Streamline 203k – Renovation costs generally limited to $35,000.  The work can be done by the homeowner or contractors. Typical renovations include painting, carpet and replacement of appliances.  This loan does not require a HUD counselor, and is very close to the cost of a normal FHA loan.
  • Full 203k – Renovation costs are only limited by the FHA loan limits for the county. The renovations are generally more extensive so they require the assistance of a general contractor.  An FHA Consultant is involved to ensure the project proceeds according to plans. Remember, the loan is based on the improved value of your home AFTER completion – so you will have the budget to renovate your dream home!
Energy Improvements – Replacement of a furnace or air conditioner, or adding double pane windows or insulation are examples of renovations that can be included.  An energy audit must be completed to demonstrate the benefit of the improvements. These costs can be over and above the streamline 203k $35,000 limit.

Investment Property – Renovation Loan Options!

Written by Clay on . Posted in Investment Properties, Rental Properties

PrintPurchasing an investment property that needs a little work?  Wish you could include the costs of renovation in the loan?  You can with a HomeStyle renovation loan from Signet Mortgage!

Improvements can be anything that adds value to the home.  No longer will a purchase be held up because of the condition of the home – a renovation loan will allow repair services to cater you after closing with funds borrowed at the time of purchase. The lender simply creates a hold-back for the funds that are dispersed as the work is completed. It doesn’t matter whether you are a residential customer or large corporate customer with a high-rise building, you’ll receive the same high-standard of care, service and support. Property must be a single-family home and the loan-to-value based on the “as completed” value is limited to 75%.  The underwriting is based on slightly more conservative Fannie Mae guidelines requiring a 720 FICO score, etc. Cost of improvements can be up to 50% of the “as completed value” which provides a great deal of flexibility to buy a distressed property and turn it into a solid investment. Improve your return on investment by putting less cash into the property. This example illustrates purchasing a $400,000 property with and without a renovation loan. The ability to add the desired renovations into the value that the 75% loan is calculated on, lowers your cash investment.

Renovation_Loan

If you made it this far you are obviously interested in the details on how a renovation loan can work to purchase your next investment property.  As I am a CPA and licensed as a real estate broker I am uniquely suited to assist with even the most complex situations and would be happy to help.  Please give me a call today.

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Clay Selland, President, Signet Mortgage Corporation

925-807-1500 x303

Clay@signetmortgage.com

How to Pay for Home Renovations

Written by Clay S. on . Posted in Current Events, HECM, Retirement, reverse mortgage

ReVisions Resources posted this article of mine on their blog this morning. ReVision Resources is dedicated to helping seniors by connecting them with ideas and resources to stay independent.

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Ahome remodel can arise out of need or desire – either way figuring out how to pay for it is likely the biggest barrier homeowners face when considering a remodel for their home. Your home should be comfortable and safe. If updates are needed to make your home more functional, it will allow you to enjoy your home more too! There are many options to financing home improvements and these may be more affordable and flexible than you think.

Renovation Loan

A Renovation loan (FHA 203(k)) or the Fannie Mae Homestyle renovation loan is designed to finance home improvements and work best when refinancing or purchasing a home. Estimates to complete the work must be obtained prior to loan approval and the cost of those improvements can be rolled into the loan amount. Generally the work must be completed in the next six months and are paid through proceeds of the loan.

The ideal situation could be the purchase of a home that is not exactly the way you want it. It may need carpet, paint, new windows and perhaps a new bathroom or kitchen to make the home perfect. The FHA 203(k) loan has two levels. A streamlined loan for improvements costing less than $35,000 is relatively straightforward and is ideal for cosmetic upgrades. A standard FHA 203(k) loan can finance major renovations including adding a room or remodeling a kitchen or a new roof.

This is one loan with one payment. It is important to note the FHA loan will have attractive interest rates but will have the added expense of mortgage insurance.

Home Equity Line of Credit

A Home Equity Line of Credit (HELOC) is best used when you already own a home with a current first mortgage on the home at market interest rates. You may simply need funds for a renovation or repair. With sufficient equity in your home you can set up a line of credit that you can access as needed in your project. HELOC’s will have a variable interest rate generally at prime +1.5% – 2.5%. Currently the prime rate is very low so this option can be very attractive and best used if you are in a position to pay it off in the next five years or so.

Reverse Mortgage

A federally insured reverse mortgage or Home Equity Conversion Mortgage (HECM) can be a valuable tool in financing home renovations. In this case all borrowers on the loan would need to be 62 years of age or older, and have the ability to pay property taxes, HOA and insurance. The unique benefit of a reverse mortgage is that there are no required monthly payments. Instead, interest and the mortgage insurance costs are added to the outstanding loan balance. Functioning much like a HELOC, funds are accessed only when needed.

Available funds can be used for renovations to make the home safe such as remodeling a downstairs bathroom and converting a bedroom, avoiding the need to use stairs every day. Available funds can remain parked for use in an emergency somewhere down the road.

If you would like to explore what might be the best options for you, feel free to give me a call.  Clay Selland, President, Signet Mortgage Corporation 877-877-8420 x303 or Clay@SignetMortgage.com

http://revisionsresources.org/how-to-pay-for-home-renovations/