Understanding the benefits and process of a Residential Renovation Loan for Realtors

Transcription

1 Understanding the benefits and process of a Residential Renovation Loan for Realtors

2 What is a Renovation loan and how does it work? Why do you need to know about Renovation loans? How will Renovation Loans help you sell more properties?

3 Renovation financing allows a borrower to Purchase or Refinance a home in less than ideal condition and make the improvements immediately after closing. The cost of the renovation is rolled typically into a 30 year mortgage making it very affordable.

4 Homebuyers: Can purchase homes in less than ideal condition (as-is) and address the problems immediately after closing. Homeowners: May upgrade/modernize or expand to increase value ( to stay in or list for resale)- Love it or List it!. Equity loans are very hard to get and credit cards are too expensive.

5 Real Estate agents: Sell dated and properties needing repairs by helping potential buyers envisioning remodeling possibilities.. Sell a Vision- what it could be, not what it is. REO s, Short Sales, HUD properties, as-is, appraisal issues, CO responsibility of buyer. Contractors: Offering financing options to an uneducated public, increasing sales.

6 Second Home owners and buyers: advantage of the program. Can take Investors can purchase homes in need of repairs, not limiting them to pay cash ( this makes it possible for you to sell more units to an Investor freeing up capital to make multiple sales). They can also upgrade for increased rent rolls or to list for resale.

7 Owner occupants 3.5%-5% down minimum Second homes 10% down Investors 20% down Or for a refinance similar equity positions after the home in renovated ( appraisal is on the after improved value, not the way it is currently. Make the property ready for resale at the maximum price.)

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9 Contact Sales Price $200, Total Renovation Costs ( Including Contractors Estimate and all other financed fees such as Contingency reserve, inspection. Title updates, other fees. Etc..) $55, Total Acquisition Cost $255, Loan 95% LTV $242,250.00

10 Borrower contacts a Renovation specialist: loan options are discussed and preapproval decision is made. FNMA /Conventional vs. FHA/Government. Contract of Sale is written (Purchase) Work write up/estimate Contractor or HUD Consultant. Appraisal Finalize commitment and clear conditions if any.

11 Loan closes/funds prior to any work beginning. Repairs funds are held in an escrow account and disbursed base on specific loan guidelines (usually after an inspection/up to 5 draws). Be sure your borrower deals with a Lender who administers the draws directly to avoid payment delays.

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13 After Home Loan

14 Attract more potential buyers, those looking for fixer uppers Overcome buyers cosmetic objections (Vision) How many hours have you spent driving homebuyer from listing to listing? The perfect Loan Product for properties being sold AS-IS - REO and short sales. Realtors are paid when the loan closes, not after repaired Increases your referral base utilizing niche products (Investors, and word of mouth about immediate equity at times)

15 Helps you sell or list properties that need TLC Increase your listings (acquire those previously on the market for an extend period do to improper marketing) When its time to re-list, the property is already updated Market your current listing using proven methods, working with a Renovation Specialist. (Proactively doing a feasibility study) * Speak with your Renovation specialist for details

16 Yard signs (before and after the sale) Open house flyers and good faith scenarios Feasibility studies from consultant (available for a low fee)

17 Homes can be knocked down and rebuilt using part of the existing foundation Homes can be raised and renovated to meet new FEMA requirements Homes can be made larger/additions. Modular homes can be used with the programs An existing home can be moved to another lot Close loans with current/possibile appraisal conditions (converting them to a Renovation loan and closing as-is with the same lender!)

18 Remodeling market totaled nearly $298 Billion in 2012 Estimated to grow at an annual rate of 3.5% from 2013 to 2015 Median age of housing stock is currently 35 years +account Homes account for over 22 percent of national energy usage, and about half of the national housing stock was build before Median square footage of new homes today is 2,280, compared to 1,595 for homes built in the 1980s Median square footage of new homes today is 2,267, compared to 1,595 for homes built in the 1980s Remodeling market totaled nearly $286 Billion in 2009 Estimated to grow at an annual rate of 3.5% from 2011 to 2015

19 Trade-up buyers spend 22% more on home improvements than first time homebuyers Income bracket: 80K to 120K Expenditures by category: Kitchens - $16 Baths - $11 Additions/alterations - $28 Systems - $23 Replacements - $44 (2011 in Billions) Homes account for over 20 percent of national energy usage, and about half of the national housing stock was build before Median square footage of new homes today is 2,267, compared to 1,595 for homes built in the 1980s

20 Return based on type of improvement: Bath 64% Kitchen 69% Master Bedroom 63% Basement 70% Deck 73% (National Average) Return based on type of improvement: Bath 64% Kitchen 69% Master Bedroom 63% Basement 70%

21 It is expected that the remodeling market will grow by roughly 44% between 2013 and 2015 It is expected that the remodeling market will grow by roughly 43% between 2010 and 2015

22 1970 s FHA 203k (Full) 1990 s Fannie Mae HomePath & HomeStyle 2000 s FHA 203k Streamline..HHistory of the programs 1970 s FHA 203k 1990 s Fannie Mae HomePath & HomeStyle 2000 s FHA 203k Streamline

23 FHA 203k Full/Consultant K FHA 203k Streamline K HomePath Renovation HomeStyle Renovation

24 The Full 203k is very similar to the 203k Streamline. There a The Full 203k is very similar to the 203k Streamline. There are only a couple key differences with this loan product. e on Any Structural Repairs. Something as big as jacking up your house to replace the sill plate falls under the Full 203k. Moving or altering a load bearing wall. So would knocking the house down to rebuild it, as long as you leave part of the existing foundation. y a ccost. The Streamline is $35,000 MAX (Line B14 on the Maximum Mortgage Worksheet). If your repairs and renovations go above $35,000 then you need to get into a Full 203k loan. HUDHUD Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write-up before the appraisal Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write-up before the appraisal le key differences with this loan product. Structural Repairs. Something as big as jacking up your house to replace the sill plate falls under the Full 203k. So would knocking the house down to rebuild it, as long as you leave the foundation. HUD Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write-up before the appraisal. Cost. The Streamline is $35,000 MAX (Line B14 on the Maximum Mortgage Worksheet). If your repairs and renovations go above $35,000 then you need to get into a Full 203k loan.

25 Structural alterations and additions Garage (attached/detached) Remodel kitchen or bathroom Install appliances Changes to eliminate deterioration and reduce maintenance Repair swimming pool (up to $1,500) Modernize plumbing/heating/air conditioning/electrical systems Install or repair roofing/gutters/downspout Install flooring/tile/carpet Energy conservation improvements Major landscaping/decks/fencing Improvements for accessibility Interior and exterior painting Improvements that are a permanent part of the real estate

26 New tennis court Gazebo or bathhouse Additions or alterations to provide commercial use Photo mural Satellite dish New swimming pool Outdoor fireplace/hearth/barbecue pit

27 WHAT S THE DIFFERENCE? The Streamline (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. The Streamline (k) program includes the discretionary improvements and/or repairs.

28 Repair/Replacement of 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 Painting, both exterior and interior Weatherization, including storm windows and doors, insulation, weather stripping, etc. Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/ dryers, dishwashers and microwave ovens after the first $5,000.

29 Accessibility improvements for persons with disabilities Lead based paint stabilization or abatement of lead-based paint hazards (HUD properties only) 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 residing Septic system and/or well repair or replacement

30 Major rehabilitation or major remodeling such as the relocation of a load bearing wall New construction (including room additions) Repair of structural damage Repairs requiring detailed drawings or architectural exhibits Landscaping or similar site amenity improvements Any repair or improvement requiring a work schedule longer than six months Rehabilitation activities that require more than two payments per specialized contractor

31 Max Loan To Value (LTV) Purchase 95% Owner Occ. (SFR only) Purchase 85% Owner Occ. (2 units) Purchase 75% Owner Occ. (3-4 units) Purchase 90% Second Home (SFR only) Purchase 80% Investor (SFR only) Purchase 90% Second Home (SFR only) Purchase 80% Investor (SFR only)

32 The loan amount is based on LTV derived from lesser of: TOTAL acquisition cost including all construction related expense Or from the as completed value of the home

33 Minimum Credit Score 660 Owner Occ and 2 nd Home 660 (if self-employed) 700 (Investor)

34 There are no restrictions on the type of improvements that can be financed; however all improvements must be fixed to the property and add value. Luxury items are permitted New Pool-Deck-Pavers.Vision!

35 No minimum renovation amount Maximum: Funds for renovation (including contingency reserves, soft costs, and payment reserves) cannot exceed 50% of the estimated as completed value.

36 Where do I find an eligible property?re do I find property Borrowers or Realtors must go to the Fannie Mae website to view properties available for HomePath Renovation Financing in their area of interest. FNMA REO s Only on this site..

37 All properties must be designated by Fannie Mae on the website as eligible for HomePath Renovation financing.

38 The file must be documented with a copy of the specific property page from the website that includes the property description and details to verify the property is eligible for HomePath Renovation financing as indicated by the following symbol:

39 Purchase transaction only. 1 to 4 unit owner occupant 1 unit Second Home 1 to 4 unit Investment properties ( no manufactured housing) Condominiums (projects are NOT subject to standard FNMA guidelines)

40 Primary 1 unit( including condo) 95% LTV 660 FICO 2 Unit 85% LTV 660 FICO 3-4 Unit 75% LTV 660 FICO Second Home 1 Unit(including Condo) 90% LTV 660 FICO Investment 1 Unit(including Condo) 85% LTV 700 FICO 2 Unit 75% LTV 700 FICO 3-4 Unit 75% LTV 700 FICO

41 Maximum total Renovations are $35, Or 35% of after improved value (Appraisal)

42 Great Deals on Fannie Mae s bank owned properties Fannie Mae's First Look period allows owner occupants, public entities, and their partners to submit offers and purchase properties without competition from investor offers. Up to 95% financing for owner occupied properties. Only 5% down required on a primary residence property and up to 6% in seller concessions on owner occupied properties Only 5% down required on a primary residence property and up to 6% in seller concessions on owner occupied properties

43 No MI required pricing adjustments in lieu of MI will apply to LTV s greater than 80% Buyers qualify with less than perfect credit Up to 85% financing for investment properties

44 If the repair requires the borrower to leave the premises in order to make the repairs, then it is ineligible for this program. -No additions Concept is to make property meet health and safety requirements.

45 Renovation mortgage Loans program are hard takes to do too and long to close! mortgage program takes too long to close! complicated Not True: It all comes down to the people that are involved in the process

46 This type of loan takes too long to close A Renovation loan does have a few more steps but should take no longer than 30 days to close

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48 This educational presentation was presented by: Movement Mortgage

49 Movement Mortgage, LLC is an Equal Housing Lender. NMLS # ( Movement Mortgage, LLC is licensed by the "Alabama State Banking Department" Lic # 21022, "Arizona Department of Financial Institutions Lic # , "Arkansas Securities Department Lic # , "Licensed by the CA Department of Business Oversight under the California Residential Mortgage Lending Act" Lic # , "regulated by Division of Real Estate" in Colorado, "Connecticut Department of Banking" Lic # ML-39179, "District of Columbia Department of Insurance, Securities and Banking Bureau" Lic # MLB39179, "Florida Office of Financial Regulation" Lic # MLD200, "Georgia Residential Mortgage Licensee" by the "Georgia Department of Banking and Finance" Lic # 23002, "Idaho Dept of Finance" Lic # MBL-8027, "Illinois Residential Mortgage Licensee" by the "Illinois Division of Banking" Lic # MB , "Indiana Department of Financial Institutions" Lic # 18121, "Iowa Division of Banking" Lic # , "Kentucky Department of Financial Institutions" Lic # MC85066, "Louisiana Office of Financial Institutions", Maryland Commissioner of Financial Regulation Lic # 19094, "Massachusetts Divisions of Banks" Lic # MC39179, Michigan Office of Financial and Insurance Regulation Lic # FL , "Minnesota Department of Commerce" Lic # MN-MO-39179, "Mississippi Licensed Mortgage Company" by the "Mississippi Dept of Banking and Consumer Finance" Lic # 39179, "Missouri Division of Finance" Lic # , "Nevada Division of Mortgage Lending" Lic # 3402/3401, "NJ Department of Banking and Insurance", State of North Carolina Commissioner of Banks Lic # L , North Dakota Dept of Financial Institutions Lic # MB102519, "Oklahoma Dept of Consumer Credit Licensing" Lic # ML002646, "licensed under the Oregon Consumer Finance Act" by the "Oregon Division of Finance and Corporate Securities" Lic # ML-5081, "Pennsylvania Department of Banking" Lic # 34374, "South Carolina Board of Financial Institutions" Lic # MLS-39179, South Dakota Division of Banking" Lic # ML.05007, "Tennessee Department of Financial Institutions" Lic # , "Residential Mortgage Loan Originator" licensed by "Texas Dept of Savings and Mortgage Lending", "Virginia Bureau of Financial Institutions" #: MC-5112, "Department of Financial Institutions" Lic # CL-39179, "WV Division of Financial Institutions" Lic # MB-32019/ML-32020, and "Wisconsin Dept of Financial Institutions" Lic # 39179BA/BR. Interest rates and products are subject to change without notice and may or may not be available at the time of loan commitment or lock-in. Borrowers must qualify at closing for all benefits. Movement Mortgage is a registered trademark of the Movement Mortgage, LLC, a Delaware limited liability company.