There is a relatively famous quote that states “buy land, they’re not making it anymore.” People who dream of building their own home have realized it can be tough to find the right spot for a new home. Thankfully, the Minnesota HomeStyle Renovation loan offered by Fannie Mae is a great alternative to building a new property.
Simplicity of the Loan
The Fannie Mae HomeStyle Renovation loan in MN will allow borrowers to purchase a home and also get extra money to make improvements or repairs to the property. All of the money needed for the purchase and renovations are included in one loan at an attractive rate. This type of financing removes the need for a second mortgage.
It is also available to homeowners that currently have a mortgage and wish to refinance in order to make additions, repairs or improvements without worrying about loan to value problems.
Items That Can be Approved
Keeping things simple, the Minnesota HomeStyle Renovation mortgage states that an improvement to a home must increase the home’s overall value (Home Improvement Projects that Increase a Homes Value) and the improvement must be a permanent fixture. This means that homebuyers and homeowners can invest in things like new landscaping, wooden decks, finished basements, room add-ons, swimming pools and white picket fences. Even remodeling efforts, such as kitchen and bathroom makeovers can be approved.
Getting the Work Done
In order to get approved for the loan the borrower must employ the services of a licensed contractor. Borrowers cannot do the work themselves as a DIY project. 5 Essential Questions to Ask Before Hiring a Contractor
Contractors are not required to be a part of some master list maintained by Fannie Mae. As long as the contractor has the necessary licenses and permits from the appropriate state, county and city boards and is approved by the lender then there should be no problem.
Getting Money for the Work
After the loan is closed the contractor will begin work. The HomeStyle Renovation loan allows a total of 4 disbursements to cover the work and then a 5th disbursement to clear out any balance in the fund. The amount of money that will be allowed is determined by the initial bid submitted by contractor. Since a reserve of 10% is also required it may be possible that some money is left over. If that is the case the borrower can use the excess funds on further repairs or make a payment towards the principal of the loan.
How the Loan Works
The loan payments are calculated based on the entire mortgage amount. This means that the first payment will be the same as the last payment regardless of whether the work is completed in 3 weeks or 3 months. This makes it easier for borrowers to qualify for the loan and budget for the new loan payment.
What Properties Can be Financed
Most cases will involve people buying a Minnesota home to renovate or making improvements to an existing property. However, the Fannie Mae HomeStyle Renovation program can also be used for investment properties as well as vacation homes. For people that are looking for that lovely spot on the beach or mountains as they work towards their retirement this can be a great way to afford the extra home and make necessary improvements now.