What are the maximum loan amounts allowed on a FHA 203k or Fannie Mae renovation loan? The max loan amounts are the same as the corresponding loan after down payment.
FHA 203K – The maximum loan amount for FHA loans in counties which make up Northeast Florida is $387,500 after down payment.
Fannie Mae Renovation loan – The maximum loan amount for a SFR is $417,000 after down payment. However, Fannie Mae loan limits are higher for multi-family properties. 2 units-$533,850; 3-units-$645,300; 4-units-$801,950
On a FHA 203k or Fannie Mae renovation loan what is the MAX amount you can spend on the repairs/improvements?
FHA 203k – There is No MAX Repair Amount except the max loan limit for the area – $387,500 and/or the appraised value.
NOTE – On FHA 203k loans you get up to 110% of the After-Improved Value – 10% buffer.
Fannie Mae Renovation loan – The max amount allowed on repairs/improvements is 50% of the After-Improved value (appraisal) up to the conventional loan limits of $417,000 (SFR).
Example- $125,000 sales price + $150,000 Improvements = $275,000. Since the repairs are $150K the home must appraise for $300,000
When do your payments start on a FHA 203K or Fannie Mae renovation loan?
Since in the end they are standard loans the first payment would be the same as every home loan. You close in December your first payment is February 1st. However, on projects where the house is not habitable or there is a larger scope of work, the buyer can finance up to 6 mortgage payments into the loan (or when the house is habitable).
“Special Financing” Signs for Listings –THEY WORK! If you have a less-than-perfect listing, outdated home for sale or Short Sale/REO listings, ask about our “Special Financing” signs. Combine the sign with the “Special Financing” flyers and traffic is guaranteed to increase.
Example – I had an agent put a sign on a property Thursday afternoon. I had 3 calls by noon on Friday about the property which I re-routed to the agent.
When is the appraisal ordered on a FHA 203k and Fannie Mae Renovation loans? We do not order the appraisal until the detailed Scope of Work is completed and signed by the buyer and the contractor. The appraisal is performed Subject-To the After-Improved value. On FHA 203k you get up to 110% of the After-Improved value which means a 10% buffer. All repairs are done AFTER CLOSING.
What happens if the utilities CANNOT be turned on with a property because of leaks, extended vacancy, etc? With the renovation loan we would include the cost of any necessary repairs AND we will always keep at least 15% contingency money in the case there are additional repairs needed. Example – Cost of work = $10,000. Contingency would be at least $1,500. For homes that have been vacant for least 12 months – JEA will require an electrical inspection and city inspection prior to activating the power or water.
How is the down payment calculated on a FHA 203k loan? The minimum 3.5% down payment is calculated off the sales price of the house plus the cost of rehabilitation or repairs. Example: $100,000 sales price + $15,000 repairs = $115,000 x 3.5% = $4,025. A buyer can certainly choose to have a larger down payment but these are the minimums.
Are Renovation loans – FHA 203k and Fannie Mae Homestlyes – good for Refinances too? Yes. You can Refinance & Renovate which means not only lowering your interest rate, but also including the cost of improvements as well. 3 great advantages:
Appraisal is based on After-Improved Value
FHA 203k – you get up to 110% of the after-Improved Value.
Closing costs can be financed into the loan
On FHA 203k and Fannie Mae Renovation loans can the buyers act as their own contractor? While the guidelines on some versions of the loans allow for “Self Help”, both HUD and Fannie Mae discourage the practice because of the level of risk. The guidelines call for the buyers to be licensed/insured contractors AND there are NO upfront monies provided for materials. So, the buyers must prove the ability to perform the job in workmanlike manner AND have sufficient funds for both the loan and repairs. There are other guidelines that restrict the amount of work that can be done in a “Self Help” transaction.
On a HUD REO property, what does it mean when HUD allows an Escrow Holdback?
HUD foreclosures generally are not financable As-Is. The HUD appraisal/property condition report will note the major items to be addressed and a very rough estimate of the costs. When HUD allows for an escrow holdback it simply means they will allow the buyer to escrow his/her OWN funds to address the necessary repairs in order to meet FHA minimum property standards. However, the majority of the time there are additional items to address after inspections AND the buyers are better off using either a FHA 203k or Fannie Mae renovation loan to address the property conditions. HUD properties are best addressed on a case-by-case basis to ensure the best solutions are being used.
On FHA 203k loans are there different qualifying standards than a typical FHA Loan? No! credit qualifying is the same for any FHA loan with REMN. The only big qualifying difference is the Loan Amount as the buyer must qualify for a higher loan amount with a FHA 203k loan because of the additional repair/improvement monies.
What is the maximum amount of work that can be done with a HomePath Renovation loan? There is a $35,000 maximum for cost of renovation on a HomePath Renovation loan. However, both FHA 203k and Fannie Mae Standard renovation loans do NOT have a hard Maximum Repair Amount.
If a buyer wants to use a VA loan but the home has WDO damage etc. is there any way to avoid a renovation loan? Yes! REMN offers the HomeFixer Program on ALL loans – including VA. If there are minor repairs items that no do NOT affect the health and safety of the property, the buyer can escrow up to $5,000 of their own funds to address the repairs within 14 days of closing. CLICK HERE for HomeFixer Details.
If a buyer wants to use a conventional loan and put 20% down, what happens if the home needs a new roof (ex) in order to obtain financing? We simply treat the transaction as Fannie Mae renovation loan but the buyer can choose to put additional money down. Ex – House is $200,000 but needs a new roof. Buyer gets an estimate for $10,000 for new roof. $210,000 x 20% = $42,000. The buyer can always pay more down and not finance the repairs, but the Renovation Loan/Appraisal allows the transaction to close despite of the property condition.
How do you know the amount of money to include for repairs in a FHA 203k or Fannie Mae conventional loan? For the sake of getting an initial loan approval we either make an educated guess on repair costs or submit a loan to qualify for the MAXIMUM loan amount. However, when the Scope of Repairs (SOR) if finalized we simply edit the loan to match and update all numbers for the buyer. They key is getting that initial credit approval without waiting on the Scope of Repairs to be finalized.
Final SOR comes in at $17,000 we adjust the loan to $167,000 prior to final approval and closing.
What happens if we Fannie Mae accepts our offer using a Homepath Renovation loan but it turns out FHA 203k was a better loan choice for the buyer? Simple edit. We can amend the contract to indicate buyer is using a FHA 203k loan. As long as Fannie Mae knows you are using the correct type of loan to get the property closed (renovation) they will allow you to edit the contract. Ideally, we will pre-approve the buyers prior to the offer so the initial contract is correct from the start.
What are the differences with when Fannie Mae or Freddie Mac is the seller on a REO property? Since they are officially government-backed agencies, both Freddie and Fannie are exempt from paying Deed Stamp Taxes unless specifically addressed on the REO contract addendum. In addition, much like a typical REO property, the seller will not pay the settlement fee ($450-$850) or survey ($350). NOTE – If the contract is written correctly, Fannie Mae will often pay up to 6% of buyers closing costs/prepaids (on owner occupied) and Freddie Mac will pay up to 3% of buyer’s closing costs/prepaids. Each property/asset manager can dictate what the bank will pay on behalf of the buyer.
With FHA 203k or conventional renovation, if a WDO inspection indicates a house has Live Termites does the seller/bank have to treat the house before closing? NO. As long as the treatment is listed on the Scope of Repairs it will be done AFTER CLOSING like everything on a FHA 203k or Conventional renovation loan.
If a home is partially rehabbed but still needs wall, plumbing, electrical etc., can that be finished with a FHA 203k or Conventional renovation loan? YES. As long as the home was existing and was originally issued a certificate of occupancy (1 year for FHA) you can complete the work in your loan. However, on Conventional Renovation loans you CAN complete a new home that was never finished or issued a certificate of occupancy (or add a pool).
Can someone purchase and renovate a 4-unit property with an FHA 203k loan? YES. You can do up to 4 units as long as you live in one of the units as your primary home. NOTE – The buyer can use projected rental income from the other 3 units to help qualify for the loan.
What is the minimum credit score for a Fannie Mae HomePath or HomePath Renovation loan?
HomePath -LTV greater than 80% – 660 and auto approve in desktop underwriting (DU); LTV less than 80% determined by DU but generally 620.
HomePath Renovation – LTV greater than 80% – 660 and auto approve in desktop underwriting (DU); LTV less than 80% determined by DU but generally 620.