Help for fixer-uppers is on tap
People interested in purchasing certain fixer-upper homes have an option called the HomePath Renovation loan.
To qualify, the property must be a Fannie Mae REO, or Real Estate Owned property, which is a class of property owned by Fannie Mae after an unsuccessful sale at a foreclosure auction. The listing will indicate whether the property qualifies for the HomePath Renovation Loan.
According to Susan Callahan, branch manager at HomeBridge Financial Services, these homes do not typically meet the health and safety requirements put in place by Fannie Mae. They may be missing shingles, have broken tiles, drywall damage or bathrooms and kitchens that do not work. The renovation is not limited to repairs. Borrowers may add new flooring, French doors or other upgrades. However, Fannie Mae does not allow the financing of kitchen appliances.
HomePath Renovation loans have a cap of $35,000 for labor and materials. No mortgage insurance is required on these loans. If the property will be the borrower’s primary residence, five percent down will be required with 10 percent necessary for second-home owners and 20 percent down on investment properties.
Anyone who qualifies for a mortgage loan that conforms to Fannie Mae guidelines with a credit score of 660, if the loan to value is above 80 percent, will qualify for a HomePath Renovation loan. Programs that mirror the HomePath Renovation are available for borrowers with a lower credit score.
The program allows for one general contractor and one specialty contractor. The renovation may include exterior and interior items to the primary property but may not extend to out buildings, detached garages or pools. Work must begin within 30 days of the loan closing and a home inspection is mandatory.
The home inspector will be able to provide a listing for all of the mandatory and recommended repairs as well as an estimated cost for these repairs so the borrower has a guide for interviewing and hiring a general contractor. An appraisal will be done on the home as if the repairs or renovations have been made. The contractor will provide a breakdown of labor and material costs and this money, which is financed into the loan, will be put into a third party-held escrow account. Monies are disbursed as the work is done. The HomeBridge Renovation Concierge Service, along with the home inspector, will follow up with the borrower and contractor after closing to ensure the work is completed as specified.
For more information, go to homepath.com or contact your personal lender.