How about a simple, low-cost solution that combines housing finance and home improvement? Freddie Mac’s ChoiceReno eXPress Mortgage is a genius.
From November 1st, you can use this easy mortgage to make it easier to buy a home (or refinance) and get an extra 10% of the real estate value in real dollars for renovations. If your property is located in a designated area with high needs, we are talking about 15% of the cost of the renovation.
The funds can be used to build annexed additional housing units (also called “grandma’s apartments”), extension rooms, movable walls, roofs, energy efficient appliances, insulation, air conditioning and new windows. Redecoration is also allowed, such as painting or replacing doors.
Ideally, this is for old, weary homes in need of improvement.
You cannot use this financing tool for new homes.
One to four unit condos, townhouses, second homes, and even detached apartments are all in the game.
For example, suppose your offer to purchase was accepted for $ 900,000 with a 20% down payment or $ 180,000.
Your base loan amount is USD 720,000. You have identified a work worth $ 90,000 (remember, this is a maximum of 10% of the sales price). Instead of a $ 720,000 loan, Freddie will provide a one-time $ 810,000 mortgage loan that includes cash for improvements.
There is no mortgage insurance even if you have less than 20% of your home equity – $ 810,000 divided by $ 900,000 is 90% of the cost of the loan. You also won’t pay Freddie Mac’s expensive cash-in refinancing charges. Deal.
If your real estate agent says we don’t have time to get approval within a 30- or 45-day escrow, that’s bullshit.
You need a good written quote from a licensed contractor or home improvement store (such as Lowe’s or Home Depot) for material and labor costs. It doesn’t have to be as detailed and detailed as a construction loan.
If you are a licensed contractor, you can do the job yourself. But you cannot pay yourself for the work.
Unlike construction finance, you are allowed to advance 100% of the cost of materials to the store or your contractor under mortgage financing.
Ownership mortgage rules usually oblige borrowers to borrow within 60 days of receiving funding, but not for this loan program. You do not need to occupy the property as renovation work is currently underway.
Your lender’s appraiser must have a completed value of $ 990,000, which equals your purchase price of $ 900,000 plus $ 90,000 for improvements. Works must be completed within 180 days of closing. The inspector will exit to confirm completion.
In the event of an unexpected delay, you should contact a serving lender.
This funding tool is the best I’ve ever seen for first-time buyers, eliminating the need to come up with the big bucks that are usually needed to transform your new home into a personalized palace.
Your main home can be purchased for as little as 5% down payment or 5% equity (for refinancing transactions) with a loan amount of up to $ 822,375 in Los Angeles and Orange counties. Even with a 5% reduction, you can still pump these improvements up to 10% of the property value.
In some cases, Freddie Mac allows an initial payment of 3% of the qualifying credits (maximum $ 548,250). Freddie Mac does not offer high balance mortgages in the Inner Empire.
The amount of your loan increased for repairs can never exceed the maximum loan limits set by Freddie.
Other options include construction loans, lines of credit secured by home equity, and a second fixed rate mortgage. They all have significantly higher interest rates than the first Freddie Mac mortgage. And you have to deal with either two mortgages or refinancing an always expensive construction loan into a so-called take-out mortgage.
Tips from Freddie Mac: You are responsible for negotiating with your contractor on any agreements and / or guarantees. You are responsible for monitoring performance and timeliness. In the event of an unexpected delay, you should contact a serving lender. Remember that this must be done six months from the date of entry.
The single biggest complaint I have received from borrowers who issued mortgages for repairs and the like were about contractors. About 60% of my clients said they would never use their contractor again. Disconnect warm wires. Get referrals from people you trust and have had good experiences.
Take time to visit recently completed projects. Don’t be a curmudgeon. Lower bidders tend to inflate prices with large change orders. Always check links and licenses.
Financing instruments competing with ChoiceReno eXPress Mortgage are Fannie Mae Homestyle, FHA 203 (k) and VA Renovation mortgage. But the bureaucratic red tape, expense, and brain drain with Freddie’s ChoiceReno eXPress are a small fraction compared to these similar products. Simple genius.
Freddie Mac appreciated the news: The 30-year fixed rate averaged 2.86%, down 1 basis point from last week. The 15-year fixed rate averaged 2.15%, which is 1 basis point higher than last week.
The Mortgage Bankers Association reported a 3.9% decline in mortgage applications from the previous week.
Bottom line: Assuming that the borrower receives an average 30-year flat rate on the corresponding loan of $ 548,250, last year’s payment was $ 38 more than this week’s payment of $ 2,270.
What do I see: Locally, highly qualified borrowers can obtain the following fixed rate mortgages for 1 point: 30-year FHA at 2.25%, 15-year standard at 1.875%, 30-year standard at 2.5%, 15-year regular a high balance ($ 548,251 to $ 822,375) at 1.99%, a 30-year regular high balance at 2.69%, and a 30-year fixed large balance of 2.875%.
Eye-catching Credit of the Week: 30 year flat rate of 2.875% excluding closing costs.
Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or firstname.lastname@example.org. His site www.mortgagegrader.com…