HomeStyle loans allow individuals to include the expense of renovation into a mortgage. It may be used to buy a new property or to refinance a current mortgage. It may cover minor or extensive repairs and thus is a helpful alternative for buildings requiring repair. The following MA HomeStyle home repair loans overview includes important facts.
Properties Suitable For HomeStyle Loans
HomeStyle loans can be used for different classifications of property types, however notable restrictions do apply. Single family properties are normally approved. Condos must be reviewed by Fannie Mae and repair is restricted to the interior of the unit. Multi-family dwellings are allowed but the total number of units may not change after the rehab. Types of properties that will not qualify are mixed use buildings, cooperatives, new construction, and multi-family buildings that are not used as a primary residence.
Limits And Terms
There are two important methods for calculating value. The first is the "as-completed" value of the home based on a professional appraisal. The second is the purchase value of the home plus the total rehab cost. The lower of these is used to calculate the loan-to-value (LTV) percentage. This determines the down payment and mortgage principal.
The maximum LTV dependent on the type of real estate. For real estate that is occupied as a primary residence, 95% is the maximum for single families, 85% for 2-unit multi-families, and 75% for buildings with 3 to 4 units. Second homes are maxed at 90% and single family investment homes 85%. Receiving cash out is not authorized.
How Home Repairs Are Treated
Home repair estimates must be evaluated for underwriting approval. All estimates must have comprehensive notations of the repairs, labor and material costs. Money for the contractor fees are held in an escrow account at closing and paid out as work is finished. Certain paperwork must be filled out by each contractor. Homeowners are not allowed to obtain compensation for work that is self-completed. All home repairs must be finished 6 months from closing.
MA HomeStyle Home Repair Loans Overview
This MA HomeStyle home repair loans overview addresses only a few of the most common questions about HomeStyle loans. More terms and qualifications apply to program processing and approval. All information is also subject to change without notification. Speak with a loan advisor for specific information and to assess if it aligns with your requirements.