Home-Improvement Mortgages

It looks like with the state of the economy many people today are opting to remodel or renovate their existing home rather than put it on the market and buy a new one. According to BuildFax via Linkedin remodeling has reached it’s highest level since 2004. Unfortunately that means many families are “trapped” in their homes. Their index of remodeling rose 24% year over year for an all-time high in home renovations and remodeling.

“As millions of Americans believe that they will not be able to secure a new home due to a variety of factors including tight credit, limited buyers and challenging job prospects, they are more and more turning to renovating and remodeling their current properties, sending remodeling activity to record levels,” said Joe Emison, vice president of research and development at BuildFax.

Monday’s report reveals continued month-over-month gains for most regions of the country as consumers invest in remodeling even as fears grow of a double-dip recession and unemployment remains above 9%.

With all the remodeling and renovating that is occurring it’s time that we look at Home-Improvement Mortgages. There are many types of Home-Improvement Mortgages available today. There is no one size fits all for Home-Improvement Mortgages so it’s important to deal with a lender that not only has access to all types of Home-Improvement Mortgages, but also understand which of the Home-Improvement Mortgages fit your unique situation the best.

Of the many types of Home-Improvement Mortgages let’s discuss in this post the Home-Style Renovation Mortgage. I have personally used this mortgage with many clients in the Houston, TX area. This Home-Improvement Mortgage can be used on either as a purchase mortgage or a refinance mortgage.

The advantage of this type of mortgage is that you have one lower rate first lien instead of a higher rate second lien. This type of mortgage can be used for major improvements like adding a room addition or renovating the entire home. In areas like Houston, TX where over-all property values have held-up this program works really well.

The Fannie Mae Home-Style Renovation program allows borrowers to combine the purchase or refinance of a home with the costs to renovate or extensively remodel the property. At closing all funds for renovation will be escrowed in an interest earning account. After all renovation work is complete, any remaining funds in the renovation escrow account will be used to pay down the principal balance of the mortgage. Soft costs such as architectural services, engineering and permit fees may be financed. Full builder third-party contracts only.

The Fannie-Mae Home-Style Renovation program allows borrowers to combine the purchase or refinance of a home with the costs to renovate or extensively remodel the property. At closing all funds for renovation will be escrowed in an interest earning account. After all renovation work is complete, any remaining funds in the renovation escrow account will be used to pay down the principal balance of the mortgage. Soft costs such as architectural services, engineering and permit fees may be financed. Full builder third-party contracts only, you cannot be the owner-builder or the owner-contractor.

PURCHASE
1. The “as-is” purchase price, renovation costs, contingency costs (if financed), eligible soft costs, interest reserve.

2. The “as-completed” value of the home.RATE/TERM REFINANCE

 

LTV is based off appraised value (subject to). Loan amount not to exceed 100% of costs (total of liens on property, plus costs of improvements and closing costs). Cash-out is not allowed. 
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