Fannie Mae HomeStyle: LifeStyle Home Improvement Loan 8/29/14

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1 Fannie Mae HomeStyle: LifeStyle Home Improvement Loan 8/29/14

2 What is a Fannie Mae LifeStyle Home Improvement Loan? Offers a solution to help Borrowers obtain financing that covers both the acquisition and/or rehabilitation of the property Purchase and rate/term refinances available Rate/term refinances offer an alternative for borrowers who do not have equity for cash-out who want to improve their property Can borrow against the projected property value after improvements Increases property value and builds equity Improvements must be permanently affixed and add value to the property Can escrow up to 6 mo. PITI if property is uninhabitable during the renovation period (primary residence only with Consultant recommendation on Feasibility Study) 2

3 Selling Tips: How to Refinance Your Low Rate Borrowers All Over Again Designed for borrowers with minimal equity and/or borrowers in rates that are low enough to where a refinance does not make sense HomeStyle offers a home improvement loan for luxury items allowing your borrower to upgrade to the lifestyle of their dreams A HomeStyle home improvement loan allows your borrower to improve their property and lifestyle while increasing the property value to pay for the improvements Unlike a standard refinance where closings costs are placed into the new loan which decreases equity, HomeStyle improvements increase the equity position WANT TO CHANGE YOUR BORROWERS LIFESTYLE? CALL HOMEBRIDGE! Swimming pools= YES Sauna/Spa= YES Remodel = YES Outdoor Kitchen= YES Tennis Court= YES Structural add -on=yes 3

4 Eligible Luxury Items Luxury items are eligible on the Fannie Mae HomeStyle loan, which is a key selling feature. Examples of eligible luxury lifestyle improvements: Exterior spa or sauna Swimming pool Built in BBQ island and outdoor kitchens Built in outdoor fireplaces In-ground swimming pool installation or repairs Satellite dishes Tennis courts Generator 4

5 Eligible Repairs Structural, non-structural and cosmetic repairs. Repairs must add value to the property and be permanently affixed. Eligible repairs include but are not limited to: Major structural alterations and additions Major landscaping and site improvements Swimming pool repair or addition Remodeling of rooms, including kitchens & bathrooms Relocation of load bearing walls Construction or rehabilitation of attached outbuilding structures (i.e. attached pool house or attached garage) Basement finishing or waterproofing Permanently affixed built in appliances 5

6 Program Eligibility Credit, reserves, ratios per AUS finding 30 and 15 year fixed terms available Conforming Loan Amounts Loan Purpose Purchase & Rate/Term Refinance Minimum FICO Per DU Findings Occupancy Primary Second Home Investment Units 1-4 Unit 1 Unit 1 Unit 1 Unit: 95% Purchase: 80% Maximum LTV 2 Unit: 85% 90% Rate/Term 3-4 Unit: 75% Refinance: 75% High Balance Loan Amounts Loan Purpose Purchase & Rate/Term Refinance Minimum FICO Per DU Findings Occupancy Primary Second Home Investment Units 1-4 Unit 1 Unit 1 Unit Maximum LTV 1 Unit: 90% 2-4 Units: 75% 65% 65% 6

7 HomeStyle Loan Features No minimum repair amount; maximum repairs 50% of After- Improved value of property For cosmetic updates, complicated projects, and luxury items Contingency Reserve established by HomeBridge: 10% Work to start within 30 days of closing; must be completed within 6 months of closing Maximum 5 draws permitted One (1) General Contractor allowed Feasibility Study prepared by HUD Consultant required when total rehabilitation costs exceed $15,000 or at requirement of HomeBridge Can finance up to 6 months PITI on primary residence with HUD Consultant recommendation in Feasibility Study 7

8 What is Included in Rehabilitation Costs Total cost of rehabilitation (labor and materials) Feasibility Study fee (required when total rehabilitation costs exceed $15,000 or per HomeBridge) Financed Contingency Reserve Amount established by HomeBridge Renovation Concierge Department Inspection Fees Permit Fees (as applicable) Architectural/Engineering Fees (as applicable) Final Title Update Fee (one per transaction) Up to 6 months PITI if property uninhabitable with HUD Consultant approval (owner occupied only) Discount Points 8

9 Maximum Mortgage Amount Purchase transactions: LTV is based on the lesser of: Purchase Price plus total cost of rehabilitation or After-Improved value Refinance transactions: calculated LTV is based on the After-Improved value In other words: The LTV is determined by dividing the loan amount by the After-Improved value Maximum allowable repairs cannot exceed 50% of After- Improved value of property Benefit of Fannie Mae HomeStyle LifeStyle loan: can borrow against the property value after improvements 9

10 Maximum Mortgage Amount: Purchase Calculations Step 1: Identify the lesser of the below figures: Purchase Price + Total Renovations Costs* OR After-Improved Value Step 2: Multiply the lesser figure from Step 1 by the calculated LTV* to obtain the loan amount: Lesser Figure x Calculated LTV** = Loan Amount *Maximum allowable repairs cannot exceed 50% of After-Improved value **Up to allowable program maximum LTV 10

11 Maximum Mortgage Amount: Purchase Example HomeStyle Renovation Purchase Purchase Price and Renovation Costs Purchase Price $ 280,000 Total Cost of Repairs (labor & materials) $ 15,215 Allowable Renovation Related Costs (i.e. permit, architectural fee) $ 1,875 Contingency Reserve (10%) $ 1,521 Allowable Financed PITI (owner-occupied only) $ 1,500 Total Purchase Price and Renovation Costs $ 300,111 After-Improved Value $ 290,000 Loan Amount based on desired LTV of 95% Calculated on the lesser of As-Completed Value or Purchase Price + Renovation Costs $ 275,500 11

12 Maximum Mortgage Amount: Refinance Calculations Loan amount equals the calculated LTV* multiplied by the After-Improved value Calculated LTV* X After-Improved Value** = Loan Amount *Up to allowable program maximum LTV. If unpaid principal balance + total rehab costs + closing costs are greater than max allowable LTV, lesser applies **Maximum allowable repairs cannot exceed 50% of After-Improved value 12

13 Maximum Mortgage Amount: Refinance Example HomeStyle Renovation Refinance Existing Debt + Renovation Costs 1st Mortgage $ 185,000 2nd Mortgage (payoff of purchase money second eligible) $ 4,950 Total Cost of Repairs (labor & materials) $ 39,500 Allowable Renovation Related Costs (i.e. permit, architectural fee) $ 2,200 Contingency Reserve (10%) $ 3,950 Closing Costs $ 1,900 Allowable Financed PITI (owner-occupied only) $ Total Existing Debt + Renovation Costs $ 237,500 After-Improved Value $ 250,000 Maximum Loan Amount based on desired LTV of 95% Calculated on After-Improved Value $ 237,500 Loan Amount Calculation After-Improved Value x Desired LTV (up to allowable program maximums) In this example 95% of the After- Improved value equals the loan amount of $237,500 13

14 Why HomeStyle is the Solution: A Working Example NEW SOLUTION: HOMESTYLE LIFESTYLE HOME CURRENT CHALLENGE: NO EQUITY IMPROVEMENT LOAN Fannie Mae 85% Cash Out Loan HomeStyle 1st Mortgage $185,000 1st Mortgage $185,000 2nd Mortgage $4,950 2nd Mortgage (payoff of purchase money second eligible) $4,950 Closing Costs $1,900 Total Cost of Repairs (labor & materials) $39,500 Total $191,850 Allowable Renovation Related Costs (i.e. permit, architectural fee) $2,200 Value $225,000 Contingency Reserve (10%) $3,950 Maximum Loan Amount per Fannie Mae Guides $191,250 Closing Costs $1,900 Total Existing Debt + Renovation Costs $237,500 After-Improved Value $250,000 Maximum Loan Amount based on desired LTV 95% Calculated on After-Improved Value $237,500 AVAILABLE FUNDS FOR REPAIRS/RENOVATIONS $0 AVAILABLE FUNDS FOR REPAIRS/RENOVATIONS $45,650 14

15 HomeStyle GFE Placement HomeStyle Renovation Specific Fees Fee Inspection Fee(s) Final Title Update Fee Permits (as applicable) Architectural/Engineering Fees (as applicable) Feasibility Study Not Required (total cost of renovation < $15,000) Estimate re-inspection fee at $200 per draw X 3 draws ($200 X 3) 1 Final Title Update Fee per HomeBridge Final Title Update Fees by State Matrix Amounts per Contractor Bid(s) or Feasibility Study Amounts per Contractor Bid(s) or Feasibility Study Feasibility Study Required (total cost of renovation > $15,000 OR per HomeBridge) Number of draws and fee per draw per Feasibility Study 1 Final Title Update Fee per HomeBridge Final Title Update Fees by State Matrix Amounts per Contractor Bid(s) or Feasibility Study Amounts per Contractor Bid(s) or Feasibility Study GFE Block Block 3 Block 4 Block 6 Block 6 Feasibility Study Fee N/A Amount per Feasibility Study Invoice Block 6 15