For years, if you did a renovation mortgage to buy or fix up your home - it was probably an FHA 203K with limited $.
Today, Realtors dealing with lack of homes are talking with the Clients about a Renovation Purchase mortgage - so that when their Client sees a home that they "love" except: it is missing a pool, needs a renovated kitchen, 5th bedroom, den, finished basement, etc. - they have an alternative.
Every 5th call I get is for renovation (FNMA HomeStyle) Purchase financing.
1. Purchase prices are exceeding the FHA limits;
2. the borrowers have excellent credit
3. Buyers want the lower Mortgage Insurance cost that a conventional loan offers
Maximum LTV: 95% on a primary residence purchase.
Maximum renovation cost $200,000; maximum total loan amount : $417,000
LTV is based on the lower of Cost (See example below) or "As is" (after repaired value) by appraisal
Purchase Price: $200,000 Renovation Costs: $50,000 Value after renovation: $275,000
95% of the lower (purchase price+renovation costs) = $250,000 x 95% = $237,500
This loan program is a great asset for Realtors who are struggling with sales in markets where
demand is outpacing supply.
note: only approved lenders/banks can offer the FNMA HomeStyle loans; it is Not a standard program that any mortgage broker can offer. They must have a construction/renovation dept that is certified by FNMA.