Renovation Mortgage

According to finanaical investment company Morgan Stanley about ninety-five percent of foreclosed homes need some type of renovation or rehab work done to them. With investors seeking to acquire rental properties through REO sales it’s important to be able to obtain financing for these foreclosure purchases by investors. Morgan Stanley estimates that the average foreclosed home will need at least twenty-five percent of the purchase price of renovation work to make the property livable and rentable.

There are also people that are looking for a good deal on a foreclosure as their primary residence. Again these buyers need to be prepared to do renovations to make the property suitable for both themselves as occupants and to the satisfaction of the lender to obtain a mortgage on the property.

There exists a little known mortgage product for both the investor in foreclosed properties and for the person obtaining a foreclosed property as their owner-occupied primary residence.

This product is the Fannie-Mae Home-Style Renovation Mortgage. It can be used for primary residences, second or vacatin homes, and for investment properties held by investors. Let’s look at some of the features of the Fannie-Mae Home-Style Renovation Mortgage for each type of property.

If used on a primary residence the borrower can make a five percent down-payment for this mortgage, on a second or vacation home they are required to make a tewney-perecnt down-payment, and for an investment proeperty the mortgage requires a twenty-five percent down-payment.

The Fannie-Mae Home-Style mortgage can be used on a single-family residence, a warrantable condo, or a PUD. It cannot be used for duplexes, tri-plexes, or quad-plexes.

The minimum credit score for a primary or second/vacation home is a 680 FICO. When obtaining the mortgage for an investement property the required credit score is a 720 FICO.

In all three cases primary residence, second/vacation home, or ivestment property the maximum loan amount is the Fannie-Mae conforming mortgage limit of $417,000.

For example if you bought a foreclosed property or any property for $300,000 you would have $1117,000 avaibale to make renovations to the property. The caveat being that the property with the renovations made must appraise for at least the sales price of the property + the cost of the renovations.

To learn more about the Fannie-Mae Home-Style Renovatio

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