The FNMA HomeStyle conventional mortgage allows a buyer to purchase a home that needs renovations and include them in the financing. This facilitates the purchase of the home and the renovations in one loan rather than getting a separate second mortgage or home equity line of credit.
The combination of these loans should save closing costs as well as interest rates which would typically be higher on a home improvement loan.
The borrower will need to have an itemized, written bid from a contractor covering the scope of the improvements. Any type of renovation or repair is eligible if it is a permanent part of the property. Improvements must be completed within 12 months from the date the mortgage loan is delivered.
Up to 50% of the renovation funds may be advanced for the cost of materials after the closing of the loan.
This mortgage does have a provision for the borrower to do a portion of the work themselves if it doesn't exceed 10% of the total project and it must pass inspection on completion just as the contractor's work.
It is recommended that borrowers thoroughly research this program before they commit to a loan. For detailed information, see FNMA HomeStyle Renovation Mortgage and Selling Guide Announcement SEL-2017-02. It is important to work with a mortgage officer who is familiar with these loans who can guide you through the process.
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