If you are planning to make home renovations or repairs, there are many options to help with financing. Homeowners can apply for lines of credit, in store financing, or home equity loans. However, these are not the only ways to pay for your project. If you have recently purchased a home, or are trying to buy a home that may need some extra repairs, you can apply for a HomeStyle Renovation Mortgage. This week, Ransom Kelly at Assurance Financial is here to tell you about this unique program designed for newly purchased homes.
What is a HomeStyle Loan
HomeStyle Loans are a product offered by Fannie Mae that enables someone to add additional financing to make repairs on a newly purchased home. The funding can be added to an existing mortgage, which makes the process more efficient and may result in less closing costs. Often intended for minor repairs, the loan will be based on the future value of the home once the renovations are completed.
Requirements for HomeStyle Loans
There are specific requirements for approval of HomeStyle Loans, and for which types of homes can qualify. Here are some of the eligibility and qualification parameters:
- An approved contractor or architect must make repairs, and they provide plans before the mortgage is approved.
- Some lenders permit borrowers with one-unit, owner-occupied homes to make repairs themselves.
- Contractors must provide specific timelines and deadlines in their proposals; repairs typically need to be made within six months of the home closing (100 days for energy improvements).
- Borrowers can be individuals, business or nonprofits. Individuals that apply should show good credit scores and reasonable debt-to-income ratios.
- Improvements must be cost-effective.
- Lenders can hire an appraiser to confirm the home value once the project is completed in order to pay the contractor.
- Fannie Mae must approve lenders and architects/contractors.
- Manufactured and mobile homes are not eligible.
Perks of HomeStyle Loans
HomeStyle Loans should result in an increased value in the home. This means that your home equity will raise quickly. You can pay for energy efficiency upgrades, which will also lower your energy bill costs. Often times, HomeStyle loans will have lower interest rates than a line of credit. Borrowers may also offer low down payments and can seek flexible financing terms. The financing can cover all sorts of costs including permits, inspections, and architect fees. In addition, you avoid having to apply for a second mortgage or type of financing!
If you are looking into a home that needs some minor repairs, then we are here to help. Ransom Kelly at Assurance Financial would love to discuss your home renovation project at our Birmingham Alabama area offices—contact our talented staff today!