1 Financing Options to support Energy Efficiency & Contractors
2 Renovation Loan Overview Renovation Loans offer a buyer the opportunity to buy a property and close as-is, financing both the purchase and repair money in one mortgage transaction. The appraisal assignment is done as if the property were complete and there is no requirement for a certificate of occupancy prior to closing. We close AS IS, payoff the seller and set up an escrow for repairs. Products: Ø Full (Standard) 203k repairs > $35,000 Ø Streamline 203k repairs < $35,000 Ø PowerSaver v HomeStyle Conventional Renovation Mortgage
3 203(k) Endorsement History 02/18/ FY FY = FISCAL YEAR (ENDING SEPTEMBER)
4 FHA Maximum Loan Limit for most counties in Kentucky What s your counties limit? https://entp.hud.gov/idapp/html/hicostlook.cfm
5 Go Green Environmentally-friendly home improvements Approved renovations Minimum $3,500 Save Green Monthly utility savings Get Green AmeriFirst pays your FHA 203k mortgage closing costs Approximately $2,000 for the average buyer & home
6 Whole-house sealing Interior/exterior sealing; weather stripping; caulk, etc. Insulation upgrades Attic: adds at least R-19 in existing insulation Wall: must add at least R-10 continuous insulation Crawl space: covers at least 500 square feet of crawl space, other specs Duct sealing Window & door replacement Windows must meet Energy Star requriements
7 Heating system upgrade Must meet current Energy Star specs Water heater Replace natural gas, propane or electric Must meet current Energy Star specs Ground source heat pump system Renewable energy upgrades Solar panels Fuel cells Micro turbine Wind turbine
8 At least $3,500 of eligible improvements into FHA 203k AmeriFirst Home Mortgage pays closing costs: 1% origination fee Underwriting fee Appraisal fee Up to $500 for a home energy audit Average: about $2,000 Home purchase price Upgrades (including $3,500 in eligible improvements) Total acquisition cost (purchase + upgrades) $80,000 $20,000 $100,000 1% origination fee $1,000 Underwriting fee $600 Appraisal fee (example, may differ by appraiser) $400 Energy audit (optional) $500 Your closing costs paid by AmeriFirst
10 Some items possibly eligible for PowerSaver Grant refinance: Room addition Bathroom remodel Upgrade furnace, air conditioning, hot water heater Kitchen remodel New roof New Windows and/or replacement Solar panels Increase insulation New Windows and Doors.
11 Typical Renovation Projects after closing New Homeowner Minor or major kitchen and bath renovations Cosmetic changes Exterior (Deck/fence) Garage Addition Finish a lower level (basement) Change in household Bathroom Addition Room Addition Two Story Addition Home Office Long-Term Homeowner Major Kitchen and Bath HVAC Replacement Doors/Windows/Siding Plumbing Update Emergency Repairs Maintenance
12 The New Homeowner Long Term Homeowner Savings Credit Cards Personal Loan Some Home Equity Home Equity Savings Credit Card FINANCING OPTIONS Change in Household Home Equity Savings Credit Card Emergency Credit Card Consumer Loan Savings
13 After the first year, major home improvement projects return an average of 86% of their investment. Minor Kitchen Remodel Bathroom Addition Major Kitchen Remodel Two Story Addition Project Type Master Suite Attic Bedroom Family Room Addition Bathroom Remodel Deck Addition Replace Siding Home Office Replace Windows 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % Cost Recouped each year, National Average
14 Not all home improvements or energy upgrades add dollar for dollar value But FHA allows lenders to use 110% of the as-completed value.
15 Top 5 mid-range home improvements Project Entry door replacement (steel) Deck addition (wood) Attic bedroom conversion Garage door replacement Minor kitchen remodel Average Cost Average Resale Value $1,162 $1, % $9,539 $8, % $49,438 $41, % $1,534 $1, % $18,856 $15, % Percent of Cost Recovered
16 Top 5 upscale home improvements What are the Most Valuable Home Improvements to a Homeowner?
17 Eligible/Non-Eligible Borrowers Eligible U.S. citizens Non-occupant coborrowers Permanent resident aliens Non-permanent resident aliens Non-Eligible Investors Nonprofit organizations and other government agencies per FHA guidelines.
18 The Full 203k loan HUD Consultants are required Major rehab project Up-front Feasibility Study (similar to a Whole House inspection) Repairs/Updates/Improvements BIDS $30, %, 15% or 20% Contingency Reserve required Finance up to 6 months into the loan Required when structural repairs or landscaping is part of the renovation project Minimum $5,000 of repairs No Identity of Interest allowed among parties
19 What s Structural?
20 HUD s Minimum $5, in Repairs on Full 203k loans Elimination of health and safety issues. Roofing, gutters & downspouts. Flooring, tiling and carpeting. Energy conservation improvements. Major landscape work & site improvement. Improvements for handicapped accessibility. Total repair/renovation budget > $35,000 Inclusive to Contingency reserve, title updates, other fineable costs.
21 What Properties Are Eligible On 203(k) s? 1 to 4 unit properties that have been completed for at least one year. Owner-occupied! FHA approved* condo s Properties have to be at least 1 year old.
22 Additional Property Type Examples Conversion of a single unit property to a 2,3 or 4 unit dwelling property or vice versa Homes that have been demolished but have an intact foundation that will be used Mixed Use Property.. Maximum Square Footage Requirements* What is Commercial Space No repairs to commercial space nor monies borrowed. (work must be done prior to close) Move a existing house from one site to another.
23 Ineligible Properties Log Homes - exceptions? Homes that have never been completed (new construction) Homes that have been completely demolished including the foundation. Note: All work that is licensed work must be bid out, completed and/or inspected by a licensed contractor.
24 The 203k Streamline Loan Introduced December 2005 Intention was to increase the number of 203k nationally by streamlining some of the requirements of the full 203k. Gradually became more popular after increasing the repair amount from $15,000 to $35,000. Eliminated the need for the HUD Consultant. Great alternative for homes that needed cosmetic repairs, upgrades versus gut rehabs.
25 Streamline 203k Highlights HUD Consultants are NOT required. Repairs/Improvements/Upgrades < $30,000 No Structural or other major repairs are allowed No Landscaping, no major mold. Self-help is highly discouraged Lower fees No general contractor is required but all work must be performed by a licensed and bonded contractor is required by local or state laws. No financing of mortgage payments
26 Streamline Eligible Repairs Use of the Streamline 203(k) program is limited to properties with the following work category items: Repair/Replacement roofs, gutters and downspouts Repair/Replacement/Upgrade of existing HVAC systems Repair/Replacement/Upgrade of plumbing and electrical systems Repair/Replacement of flooring Minor remodeling, such as kitchens, which does not involve structural repairs Exterior and interior painting Weatherization: including storm windows and doors, insulation, weather stripping, etc. Purchase and installation of appliance,- including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves Improvements for accessibility for persons with disabilities Lead-based paint stabilization or abatement of lead-based paint hazards Repair/replace/add exterior decks, patios, porches Basement finishing and remodeling, which does not involve structural repairs Basement waterproofing Window and door replacements and exterior wall re-siding Septic system and/or well repair or replacement
27 Self Help on 203k Streamlines "Self-help" arrangements in which the borrower is performing some or all of the work items are strongly discouraged unless the borrower's ability to competently perform the work in a timely and workmanlike manner is self-evident and easily documented. They must also satisfy the following requirements: Self-Help Agreement signed/dated, Written estimates from the suppliers of the materials the borrower will purchase. Cash reserves/credit sufficient to fund rehab costs until draw requests are processed, and Proof that they are a general contractor or have successfully completed rehabilitation projects. Note: Sweat equity is not permitted, which means that borrowers will not be compensated for their labor.
28 HomeStyle - A Conventional Renovation Program
29 HomeStyle Renovation Conventional rehab loan with higher loan sizes Investors allowed on 1unit properties who lease/flip with rehab funds all in one loan Second homes Purchase or Refinance & remodel From structural expansions/changes to new appliances and even swimming pools Less regulations than 203k & more flexibility Great for clients with 10% or more down payments or equity in their homes 203k Alternative most don t know about 29
30 2014 Conventional Loan Limits 1 Unit for HomeStyle in Illinois $417,000 2 Units $533,850 3 Units $645,300 4 Units $801,950 Higher loan limits HomeStyle is used for bigger projects & higher priced listings than the Maximum rehab $ amount equal to 50% of as completed value
31 Successful Strategies for You after today! Closed more deals! Offer a financing solution for almost any job. Inform homeowners about the PowerSaver Grant Sell large ticket items at $6.00/$1,000 Stop chasing bad checks and filing law suits. Work with general contractors who know and understand Renovation Mortgages.
32 Notes: HomeStyle Renovation Mortgage