Health & Fitness
Renovation Mortgages Opening Doors for Potential Home-Buyers
Tired of searching endlessly for a home that doesn't exist? Doesn't have to be that way, there are alternatives if you get creative with your financing. No need to keep searching for the perfect home when you can just CREATE it!
It's not a secret to real estate agents or those home shopping, the housing selection is extraordinarily thin right now. The good homes are few and far between and the ones that do pop on the market are snapped up quickly in multiple offer situations.
I'd like to propose an alternative to the bidding wars and endless contract writing. I'm going to suggest you take the road less traveled on your housing hunt. You will not be looking for the most immaculate house in the best neighborhood. Instead, you'll travel down the street to the beat-up, tired, needs some work property. The UGLIEST house in the best neighborhood.
But Jonathan, I want a the immaculate house. I want my gorgeous new home to be the envy of my friends and neighbors! Don't worry, it can be and with YOUR touches, YOUR flair and without dropping $150,000 of hard earned out of pocket cash for the renovation too.
Enter Renovation Mortgage Financing
Long stigmatized as too difficult, too time consuming or too expensive; renovation mortgages have seen a huge uptick in use since the great meltdown of 2006 and the stigma could not be further from the truth. If renovation loans weren't closing you would not be reading this and I would not be in California (my employer relocated me from Atlanta in February 2013 specifically to do renovation loans in Orange County).
If you're still reading you must be curious about YOUR renovation loan possibilities and how it works so let's dig in to the details.
On a purchase (renovation refinances are also available) your first lien mortgage would be based on the acquisition cost. The AC is simply the purchase price + renovation escrow. Add those together and your down payment (as low as 3.5% if needed) is taken from there. All renovations start AFTER you take possession of the property.
$400,000 Purchase Price + $150,000 in Renovation = $550,000 Acquisition Cost. $550,000 x 95% = $27,500 down payment. Yes, you read that right, you can purchase and finance $150,000 rehab all with 5% down (3.5% on FHA).
Imagine what you can do with $150K? Lots of possibilities all while keeping your funds in your pocket, in your investment account, in your 401k or set aside for some brand new furniture for your new digs!
There are three main renovation products available, each with a slightly different audience and clientele in mind. Most folks have heard of the old standby, the FHA 203k, but there are also JUMBO and CONVENTIONAL renovation options as well. Let's start big and work our way down.
Jumbo Renovation Mortgage
Still in its infancy, the jumbo renovation loan just rolled out this August. Built for a higher-end, well qualified client, the specs are as follows:
- $1.5M - Max Loan Amount
- 720+ - Minimum Credit Score
- 80% - Max Loan to Value
- Primary Residence ONLY
- $150,000 - Max Renovation Amount
For buyers this presents the perfect opportunity to get a house at a discount and come in and put THEIR touches in place rather than the seller OR and investor doing it. Contact Us
Conventional Renovation - HomeStyle
The HomeStyle is not new, it's been around for years although lenders rarely offer it. Since it is a Fannie Mae / Conventional loan it has the same credit guidelines you'd find on your standard purchase. Here are the specs:
- $625,500 - Max Loan in Orange, LA & San Diego Counties
- 660+ - Minimum Credit Score
- 95% - Max Loan to Value
- Primary, Vacation and Investor Homes Allowed
- $200,000 - Max Renovation (Exceptions Allowed)
FHA 203k (Streamline & Standard)
The 203k has been around since the 1970's and is the renovation loan that may ring a bell. With the lowest down payment and most relaxed guidelines, the 203k is the way that many first-time buyers and "BUY AFTER" buyers. The latter being the throngs of potential home-buyers that had a short sale, foreclosure or bankruptcy during the Great Recession. Here are the specs:
- $729,900 - Max Loan Amount
- 640+ - Minimum Credit Score
- 96.5% - Loan to Value
- Primary Residence ONLY
- $250,000 - Max Renovation (Exceptions OK)
In addition to the three main products, their are also some energy efficient and appraisal related repair escrow programs available. With a creative renovation specialist and a willing client there are very few properties that cannot be financed.
Finally, use a RENOVATION MORTGAGE SPECIALIST if you pursue renovation financing. These loans require expertise to execute. it doesn't stop at the loan officer either, you need a team with expertise and a lender with operational excellence as well.
Jonathan Blackwell
(949) 244-5464 or HERE