HomeStyle Renovation Loans

Renovation loans expand a consumers power to own a home that best suits their ideas at an affordable price.

• Allows a borrower to obtain a more favorably priced property in a prime location.
• Widens the borrower’s options by allowing the borrower to focus on a more limited set of parameters.
• The expanded search results allow the borrower to choose the most prime location possible while addressing deficiencies with the property.
• Increase square footage
• Add new bedrooms and baths
• Renovate kitchens and existing bathrooms.
• Update floor plan to create an open concept.
• Create additional living space by finishing basements.
• Eliminate the need to move if the borrowers current home is in a prime location.

Renovation lending will open new doors within the market and allow you to strengthen your existing relationships.

• Convert more opportunities by eliminating the possibility of losing loans due to deficiencies with the subject property.
• Create more dynamic relationships with realtors by becoming the resource that allows them to sell any home in their inventory.

Augment your current position in the market by capitalizing on the effects of renovation lending and your improved relationships.

• Revitalize communities by renovating homes
• Transform Foreclosure / REO homes
• Expand virtually any borrowers ability to procure their ideal home in their ideal location.

The HomeStyle Renovation loan is a single close mortgage that allows a borrower to either purchase a property or refinance an existing property and also include the cost of making renovations to the property.

• The borrower has one permanent loan with no need for conversion.
• The HomeStyle is a Fannie Mae conventional loan product that bridges gaps to new audiences outside of the traditional 203(k) audience.

HomeStyle Renovation Loan

• HomeStyle loans are designed to handle major home transformations, minor remodels, and everything in-between.
• Conversion to or from a single family home
• Additions
• Installation of pools and spas
• Landscaping/hardscaping projects

FHA 203(k)

• 203(k) loans are versatile, the ability to use FHA manual underwriting guidelines allows greater flexibility.
• K’s are also subject to the FHA programs mandatory MIP.
• Luxury Items
• Pool repairs in excess of $1,500
• Exterior kitchens

Major structural alterations/additions (room/garage additions, finish attics/basements, repair of termite damage).

• Tearing down a structure and rebuilding on existing foundation or part of the existing foundation
• Changes to improve function/modernization (bath/kitchen remodel)
• Converting single family to multi-family dwelling or from a multi-family to single family
• Repair/replacement/upgrade of plumbing, heating, air conditioning and electrical systems,
• Repair/replace flooring, appliances,
• Window and door replacement,
• Interior/exterior painting,
• Weatherization including storm windows/doors, insulation, weather stripping,
• Major landscaping that adds permanent value to the property and/or corrects any fire, health or safety issue,
• Repair/replace roofing, gutters and down spouts,
• Installation of new well and/or septic system
• Enhancing accessibility for a disabled person
• Well/septic repair/replacement work.

With a Consultant

• HomeStyle loans are designed to handle major home transformations, minor remodels, and everything in-between.
• Conversion to or from a single family home
• Additions
• Installation of pools and spas
• All landscaping /hardscaping projects

Without a Consultant

• Streamlines are intended for more simple renovation plans and do not require the use of a HUD Consultant.
• Streamlines have a maximum total repair escrow amount of $15,000 and have a larger list of impermissible repairs such as:
  • Structural repairs or additions
  • Major landscaping improvements
  • Architectural plans and/or exhibits

Two Halves of the Same Coin
While there are important differences between the Full and Streamline K the programs are built from the same base and are the same in many instances

• General eligibility requirements
• Credit Qualification
• Age of Documentation
• Appraisal Requirements

Eligible Properties

• Single Family Residences
• 2 – 4 Unit
• PUDs
• Established Warrantable Condos
• With more than 5 units.

Ineligible Properties

• New Construction without CO issued
• Properties not completed
• Properties that need to be entirely demolished.
• Condemned properties
• Coops
• Modular Homes
• Manufactured / Mobile Homes
• Condo Hotels
• Unique Properties
• Farms, Orchards, and Ranches
• Commercial Property

The appraiser provides the appraisal report, which must include all details of the renovation plan.
The contractor provides the Bid, which details all of the work to be performed, and then executes the renovation plan post closing.
The Consultant provides the Specification of Repairs report.

The appraiser provides the appraisal report, which must include all details of the renovation plan.
A HomeStyle appraisal is a conventional appraisal which indicates the value of the subject property ‘subject to’ the completion of the renovation plan.
All HomeStyle appraisals reflect the value of the property after the completion of the planned renovations only.
The appraiser must indicate if the utilities were on or off at the time of the appraisal.
Purchases
The value indicated by the report is the value of the property after making all of the planned renovations.
The effective value of this transaction will be the lesser of the After Improvement Value or total acquisition cost of the property (Purchase Price + Total Cost of Repairs).
Refinances
The value indicated by the report is the value of the property after making all of the planned renovations.
The After Improvement value is the only property value considered in a HomeStyle Refinance.

The appraiser provides the appraisal report, which must include all details of the renovation plan.

The contractor provides the Bid, which details all of the work to be performed, and then executes the renovation plan post closing.

MortgageDepot will work directly with one contractor who will be the General Contractor in charge of the execution of the entire renovation plan.
Subcontractors may be used, but are managed by the General Contractor.
There GC must provide a complete written bid inclusive of all work required to complete the bid, including all work to be completed by subcontractors.
The General Contractor must be sufficiently licensed and insured in accordance with all applicable standards set the be the state and local government where the subject property is located.
MortgageDepot does not allow the homeowner to participate in the renovation of the subject property, this includes purchasing materials that will be used to complete work listed on the bid.

The contractor provides the Bid, which details all of the work to be performed, and then executes the renovation plan post closing.
Bids are required when the Contractor has not:

• Initialed each page of the SOR
• Sign and date the last page of the consultant’s report
• Provide a Bid Sheet

The Consultant provides the Specification of Repairs report.
A HUD Consultant is required for any HomeStyle loan with a total renovation budget equal to or greater than $15,000.
The consultant provides the borrower with a Specification of Repairs (SOR) that outlines all of the planned renovation to subject property, the total estimated cost of the repairs, and the number of draws required.
The SOR also identifies all required repairs in addition to the borrowers requested renovations.
The Consultant also makes inspections of the work prior to each draw during the construction period.

The Consultant may also provide a Preliminary Feasibility Analysis Report
The Feasibility Analysis Report is shorter than the SOR, this report:
Indicates the cost of the repairs required to make the subject property meet minimum standards for health and safety.
Costs less than the standard SOR, the typical fee for this report is $250 – $350.
This report may be used as a tool to help home buyers negotiate the sales price by demonstrating the scope of work necessary to bring the home up to livable standards.

The Consultant provides the Specification of Repairs report.
The HUD Consultant provides a layer of insulation for both the borrower and the lender.
The up-front fee charged by the Consultant is an APR fee and must be disclosed on your initial Good Faith Estimate.
The Consultant is also subject to an Identity of Interest agreement and must not present a conflict of interest.
Consultant Fees
Renovation Cost Fee
$5,000 – $7,500 $400
$7,501 – $15,000 $500
$15,001 – $30,000 $600
$30,001 – $50,000 $700
$50,001 – $75,000 $800
$75,001 – $100,000 $900
$100,001 and up $1,000

Total amount of repairs from the contractors bid

• The entire contingency reserve
• Draw Inspection Fees
• Up to 6 Months mortgage payments (if the home is uninhabitable during the renovation)
• Title updates
• Consultant, architectural, or engineering fees when applicable
• Permits
• Note Regarding The Contingency Reserve The Contingency Reserve is required, and depending upon the Consultant’s recommendation will be between 10% – 20%
• Note Regarding Financed Mortgage Payments The Consultant will determine if the property will be uninhabitable and the duration it would be uninhabitable during the renovation.

Please provide the following documents in addition to the standard docs required for conventional fixed Fannie Mae loan.

• HomeStyle Contractors Acknowledgement
• HomeStyle Contractor Profile
• HomeStyle Consumer Tips
• HomeStyle Construction Contract
• HomeStyle Renovation Maximum Mortgage Worksheet
• HomeStyle Renovation Mortgage Payment Disclosure

With Consultant:
Specification of Repairs (SOR), aka Work Write Up
Contractor’s Bid (conditionally)
Without a Consultant:
Contractor Bid(s)
Required if the contractor did not initial all pages of, as well as sign and date the last page of the consultant’s SOR and provide a Bid Sheet.

• Begin at the Beginning
• Qualify the borrower and assemble a credit
• package with all standard docs required by DU.
• Renovation Preparation
• Do you have a reasonable expectation of the
  property’s value?
• Has the borrower selected a consultant and has
  the consultant made the initial inspection?
• Has the borrower selected a contractor? Has
  the contractor submitted a bid or bid sheet?
• Have you collected all of the required 203(k)
  forms and disclosures?
• The Appraisal
• Make sure the Specification of Repairs
  (Consultant’s report) is provided to your AMC prior
  to the appraisal inspection.

Don’t Cut Corners
Moving forward without answering fundamental questions will negatively impact the file. Taking the time to collect a complete package will provide your borrower with the smoothest possible experience.

The Renovation Concierge desk acts as the administrator during the construction period.

• All loan level fees are paid – all fees for renovation work will be placed into escrow.
• Our lender acts as the administrator during the construction period
• All draws to the contractor take place after an inspection by the consultant, the contractor is only paid for work as it completed.
• Instruct the borrower, contractor, and consultant to contact us directly with all issues and requests:
• Compliance Inspection Reports
• Draws
• Change orders
• Final Inspections
• All work must begin within 30 days of funding
• The borrower is responsible for making all fully amortized payments after closing
• All draws are subject to a 10% hold back
• The sum of the holdbacks is paid with the final draw

HomeStyle Renovation Lending Snapshot
HomeStyle W/ Consultant HomeStyle W/O Consultant
Type of construction allowed? Using a consultant will allow the borrower to take on large scale projects that include structural changes and additions.
Simple renovations- updating kitchen and bathrooms are allowable. Structural repairs and conversions are not permitted.
Is there a minimum / maximum repair amount?
There is no true minimum amount to finance. The maximum amount that can be financed for repairs is 50% of the After Improvement Value .
There is no minimum amount to finance, however the total amount financed may not exceed $15,000.
Is a HUD consultant required? Yes No
Is it possible to escrow Mortgage Payments?
Yes, however the Consultant determines if the property is uninhabitable and amount of time the property would be uninhabitable.
No Number of Draws allowed? The maximum number of draws permitted is 5.
The maximum number of draws permitted is 1.
Is there an initial draw to the contractor?
No!The contractor is only paid for work that has been completed.
No, the contractor will be paid after all work is completed and a passing final inspection is provided by the appraiser.
How much time is allowed for the completion of the renovation?
The contractor will be allowed 6 months from the date of funding to complete all renovation work.