Fannie Mae Homestyle -

Description:

Homebuyers and Homeowners can finance the costs of renovations through a single conventional mortgage. The program does allow structural related items as well as interior and exterior cosmetic improvements! At closing all renovation funds are placed into escrow and disbursed as the project moves forward.

Up to 75% of the “as completed value” can be financed and used to renovate the property!

Occupancy Type:

Primary residence, second homes and 1 unit investment properties.

2-4 family owner occupied properties

Condos (interior improvements only).

Down Payment

3% down on an owner occupied single family home when one or more buyers is a 1st time buyer

5% down on an owner occupied single family
15% down on an owner occupied 2-family
25% down on an owner occupied 3-4 family home
10% down on a second home (single units & condo only)
15% down on an investment property (single units & condo only)

Ineligible Properties:

 2-4 unit investment properties

 Multi-Family conversions for increase/decrease in unit count

 Mixed use properties

 New construction-Must have Certificate of Occupancy for a minimum of one year

 Partially completed projects

Mortgage Insurance:

Mortgage insurance is required for all loans with less than 20% down payment.

MI is based on the lesser of “as completed” value or acquisition cost (purchase price + total rehab)

Non-Occupant Co-borrower is allowed. The owner occupant borrower must make the first 5% of the down payment from his/her own funds.

Condominiums:

Condominiums must meet Fannie Mae’s standards. Verification of adequate master insurance and review of the financial statements of the condo is required.

Underwriting:

 Automated Underwriting approval is required

 Single family investment properties cannot use rental income to qualify.

 No Bankruptcy in the past 4 years.

 If there was a foreclosure, deed-in-lieu, pre-foreclosure or short sale in the past 7 years then financing available for primary residences only with a minimum of 10% down

 No 30 days lates on rent or mortgage in last 12 months.

 If the property is second home or investment, max number of financed properties limited to four.

Pre-Funding Review:

 All files require a pre-funding underwriting review by our renovation department prior to closing.

 Additional prior to closing conditions from this pre-funding review may apply.

 Please allow a minimum of 4-5 days in the process to accommodate this requirement, and 48 hours for followup conditions to be reviewed.

Reserves (money in the bank after closing):

Primary Residence 2-4 unit – 6 months’ (mortgage payment) reserves must be verified

Second Homes – 2 months’ reserves

Investment 1 Unit – 6 months’ reserves

Contingency Reserves:

 10% of the total cost of the project must be added to the loan as a contingency reserve

 15% required if utilities are not on, subject is vacant or if the scope of work warrants a larger reserve

 Unused funds from the reserve must be applied to lower the loan balance upon completion

Seller Contributions:

Primary Residences and Second Homes:

 If 5% down then seller can pay up to 3% of the sales price toward closing

 If 10% down then seller can pay up to 6% of the sales price toward closing

 Investment Properties: seller can pay up to 2% of the sales price toward closing

All seller contributions must be negotiated and be included in the sales agreement

Hazard/Homeowners’ Insurance:

The property must be insured for wind damage.

Appraisal:

 A conventional appraisal must be obtained and cannot be ordered until we have both the sales agreement and contractor’s proposal.

 Appraisal to be completed subject to the repairs/renovations as per quotes provided.

Eligible Improvements:

 Repair/replace roofs, gutters and downspouts

 Upgrade/repair/replace existing HVAC systems

 Replace/upgrade/repair of plumbing and electrical systems

 Install flooring

 Minor remodeling, such as, kitchens, which does not involve structural repairs

 Exterior and interior painting

 Weatherization: including storm windows and doors, insulation, weather stripping, etc.

 Purchase and installation of built-in appliances only. No free-standing appliances including ranges, refrigerators, washers, dryers, dishwashers and microwaves

 Improvements for accessibility for person with disabilities

 Lead based paint stabilization or abatement of lead based paint hazards

 Repair/replace exterior decks, patios, porches

 Basement refinishing and remodeling, and/or basement waterproofing

 Window and door replacements (same sizes) and exterior wall re-siding

 Septic system and or well repair or replacement

 Landscaping and site amenities allowed as long as they are permanently affixed to property and add value.

Required Documents:

 Contractor to provide a resume and references

 Homeowner/Contractor Agreement (Fannie Mae document)

 Proposal(s) for work to be completed – must be detailed and break out labor & materials

 Permit Certification: the town/city must indicate what permits are required before work can start

 All required permits must be issued before renovation funds can be distributed

 FNMA Homestyle Renovation Tips & Borrower’s Acknowledgement forms to be given to consumer

 Licenses needed where applicable/required (including all licensed subs ie plumber, electrician, etc)

 Contractor general liability insurance with minimum of $500,000 coverage.

Rehab Period: Work must begin within 30 days of closing and be completed within 6 months of closing.

Draw Disbursements:

 Appraiser inspects property and identifies the percentage of work completed to establish amount of funds to be released each time a draw is made

 No disbursements without an appraiser’s inspection

Additional Information:

 No more than 3 contractors allowed or a general contractor is required

 Borrower may not act as a general contractor as “self help” is not permitted
 Contractor acceptance/approval will be completed by the renovation team

 2 Appraiser Inspection fees max: $150 per inspection

 2 Title updates are required: 50% and 100% completion at $125 each

 Draw administration Fee of is $500 required

 All Contractor proposals must be pre-approved by Renovation Loan Coordinator

 Final contractor(s) proposals must be included in appraisal report.

Minimum Down Payment and Credit Scores:

PRIMARY RESIDENCE

1 Unit Property: 5% down and 640 score
1 Unit Property: 10% or more down 620 score

2 Unit Property: 15% down and 660 score

3-4 Unity Property: 25% down and 680 score

SECOND HOME

1 Unit Property Only: 10% down and 620 score

INVESTMENT*

1 Unit Property Only: 15% down and 620 score

* 1 Unit investment refinances are limited to 75% LTV/CLTV

Down Payment Calculations:

 Purchases: Use the lesser of “As completed value” or Acquisition cost (Purchase price + rehab costs + Contingency reserves) to determine the down payment.

 Refinances: Loan amount divided by the “As Completed Value” determines the “Loan to Value”

Fannie Mae Homestyle