One Loan for Purchase – Renovations

One Loan for Purchase – Renovations

The FNMA HomeStyle conventional mortgage allows a buyer to purchase a home that needs renovations and include them in the financing.  This facilitates the purchase of the home and the renovations in one loan rather than getting a separate second mortgage or home equity line of credit.

The combination of these loans should save closing costs as well as interest rates which would typically be higher on a home improvement loan.

The borrower will need to have an itemized, written bid from a contractor covering the scope of the improvements.  Any type of renovation or repair is eligible if it is a permanent part of the property.  Improvements must be completed within 12 months from the date the mortgage loan is delivered.

  • 15 and 30-year fixed rate and eligible adjustable rate loans are available.
  • Typical FNMA down payments are available starting as low as 3% for a one-unit principal residence to 25% for three and four-unit principal residence and one-unit investment properties.
  • Borrower must choose his or her own contractor to perform the renovation.
  • Lender must review the contractor hired by the borrower to determine if they are adequately qualified and experienced for the work being performed. The Contractor Profile Report (Form 1202) can be used to assist the lender in making this determination.
  • Borrowers must have a construction contract with their contractor. Fannie Mae has a model Construction Contract (Form 3734) that may be used to document the construction contract between the borrower and the contractor.
  • Plans and specifications must be prepared by a registered, licensed, or certified general contractor, renovation consultant, or architect. The plans and specifications should fully describe all work to be done and provide an indication of when various jobs or stages of completion will be scheduled (including both the start and job completion dates)

Up to 50% of the renovation funds may be advanced for the cost of materials after the closing of the loan.

This mortgage does have a provision for the borrower to do a portion of the work themselves if it doesn’t exceed 10% of the total project and it must pass inspection on completion just as the contractor’s work.

It is recommended that borrowers thoroughly research this program before they commit to a loan.  For detailed information, see FNMA HomeStyle Renovation Mortgage and Selling Guide Announcement SEL-2017-02.   It is important to work with a mortgage officer who is familiar with these loans who can guide you through the process.

Get Rid of Things You Don’t Need

Get Rid of Things You Don’t Need

Periodically, you need to rid yourself of things that are taking up you time and space to make room for more of what you like and want.

There’s a frequently quoted suggestion that if you haven’t used something for two years, maybe it isn’t essential in your life.

If you have books you’ll never read again, give them to someone who will.  If you have a deviled egg plate that hasn’t been used since the year your Aunt Phoebe gave it to you, it’s out of there.  Periodically, go through every closet, drawer, cabinet, room and storage area to get rid of the things that are just taking up space in your home and your life.

Every item receives the decision to keep or get rid of.  Consider these questions as you judge each item:

  • When was the last time you used it?
  • Do you believe you’ll use it again?
  • Is there a sentimental reason to keep it?

You have four options for the things that you’re not going to keep.

  1. Give it to someone who needs it or will appreciate it
  2. Sell it in a garage sale or on Craig’s List.
  3. Donate it to a charity and receive a tax deduction
  4. Discard it to the trash.

Start with your closet.  If you haven’t worn something in five years, get rid of it.  Then, go through the things again and if you haven’t worn it in two years, ask yourself the real probability that you’ll wear it again.

Another way to do it is to move it from your active closet to another closet.  If a year goes by in the other closet, the next time you go through this exercise, those clothes are on their way out.

If the items taking up space are financial records and receipts, the solution may be to scan them and store them in the cloud.  There are plenty of sites that will offer you several gigabytes of free space and it may cost as little as $10 a month for 100 GB at Dropbox, to get the additional space you need.  It will certainly be cheaper than the mini-storage building.