Are you curious about HomeStyle Renovation mortgages, but you’re not sure what they are? If you think a HomeStyle Renovation mortgage could be right for your home improvement project, but you need more information, keep reading.
Learn what a HomeStyle Renovation mortgage is and who uses them. Find out if you want a HomeStyle Renovation mortgage and how you can get one.
What is a HomeStyle Renovation Mortgage?
The HomeStyle Renovation mortgage is a type of single-close financing wherein a borrower can get the funds they need to improve their home. The terms of this type of mortgage are often more convenient and cost effective than alternative mortgage products.
Single-close financing loans are a style of borrowing designed especially for home construction and improvement. When the loan begins, it’s classified as a “construction-to-permanent” loan. Once the borrower’s home improvement project is finished, the loan converts to a permanent financing model.
The purpose of a HomeStyle Renovation mortgage is to provide a loan for the purchase or limited cash-out refinancing of real estate. The HomeStyle Renovation mortgage can only be used for these improvements and associated, approved costs. Both fixed rate mortgages (FRMs) and adjustable rate mortgages (ARMs) are available for this product on a 15 and 30 year basis.
When you get a HomeStyle Renovation mortgage, you choose the contractor that will complete your renovations. However, you lender must review the contractor(s) and agree that they’re qualified to perform the work. The lender will help you draft a construction contact with your contractor of choice. The plans and specifications related to the project will most likely be documented as a part of your loan.
If you want to do the renovation work yourself, that can also be an option. At their discretion, a lender can approve a HomeStyle Renovation mortgage for a DIY project. To qualify, the renovation project must be limited to one-unit owner-occupied home. The DIY financing cannot exceed 10% of the completed value of the final project. Reimbursement for the DIY project covers materials, but not the labor of the borrower (sweat equity.)
Who Uses HomeStyle Renovation Mortgages?
A HomeStyle Renovation mortgage can give homeowners the financial tools they need to do perform renovations on their house. These borrowers are people who want to perform basic home improvements or repairs to their property.
When a borrower gets a HomeStyle Renovation mortgage for projects like these, they can find a better deal than they might with other mortgages. A HomeStyle Renovation is a single-close first mortgage. When compared to more costly options, like a second mortgage or a line of credit on the borrowers’ home – a HomeStyle Renovation mortgage can be a more advantageous means of borrowing.
HomeStyle Renovation mortgages can also be used in refinancing. If a borrower already has a mortgage on their existing home, but needs funds for renovation, the HomeStyle mortgage can be used to refinance those funds. The total amount of the loan is determined by the value of the property once the work is complete.
For a borrower to be eligible for a HomeStyle Renovation mortgage, they must be one of the following:
- an individual looking to buy a home.
- an individual or group investing in a property.
- a registered non-profit organization.
- a government agency.
Why Do I Need a HomeStyle Renovation Mortgage?
If you have a home improvement project on a property that you’ve already mortgaged, and you want to finance the project at the most competitive rates, a HomeStyle Renovation mortgage may be right for you.
Your property is eligible for a HomeStyle Renovation mortgage if it meets any of the following requirements:
- a 1 – 4 unit residence
- a single unit second home
- a one-unit investment property (e.x. condos, co-ops, planned urban developments, etc)
Manufactured housing units do not qualify for a HomeStyle Renovation mortgage.
If you project can be completed within 12 months of your HomeStyle Renovation mortgage being issued, your renovation may qualify. Any kind of repair or home improvement is covered under a HomeStyle Renovation mortgage; provided that it’s a permanent addition and it adds to the overall property value.
A HomeStyle Renovation mortgage can cover the “soft costs” associated with home improvement: like permits, architects’ fees, licenses and etc. You can also budget for up 10% contingency expenses with this type of mortgage.
How Can I Get a HomeStyle Renovation Mortgage?
If you’re looking to get a HomeStyle Renovation mortgage, then we are here to help! Just contact us and one of our agents will get back to you ASAP.