Under Construction. Construction and Rehab Loan Programs

Transcription

1 Under Construction Construction and Rehab Loan Programs Sources: FNMA FHA Portfolio Lenders Home equity lines of credit for homes already owned FNMA Homestyle Renovation Loan Loan Purpose Purchase Terms 30 year 15 year Adjustable rate mortgages Borrower/Property Eligibility Individuals Investors (single unit only) Non-profit organizations Local government agencies 1-4 units, condos, co-ops and PUDS (no manufactured housing)

2 Loan to value (LTV) LTV is based on the lesser of the purchase price plus cost of renovation or the as completed value LTV owner occupied 1 unit 95% fixed 90% ARM 2 unit 85% fixed 75% ARM 3-4 unit 75% fixed 65% ARM 1 unit second home 90% fixed 80% ARM LTV investment property Single family only 85% fixed 80% ARM Private Mortgage Insurance Required for all LTV s over 80% Contractors Buyer must choose their own contractor for the renovation Lender must approve contractor to ensure qualifications and experience Buyers must have contract with contractor Plans and specs must be provided by a qualified person (registered, licenses or certified general contractor, renovation consultant or architect) Do It Yourself Work Rehab amount cannot exceed 10% of the as completed value Inspections required for all items costing in excess of $5000 Property may be single family only Reimbursement is limited to cost of materials or the cost of properly documented contract labor (no sweat equity reimbursement) Renovation to 50% of the after completed value

3 Costs may include Labor and materials Soft costs (architectural fees, permits, licenses) Contingency reserve of 10% - optional for a single family, required for a 2-4 unit (may be financed or funded by buyer and refunded if not used) Mortgage payments up to 6 months if the property if not habitable during construction ( only) FHA 203K Loan Purpose Purchase Refinance 203k Rehab amounts exceed $35,000 (streamlined) 203k rehab amounts of $35,000 or less Eligible Properties 1-4 family including HUD REO s Mixed use Repair Amounts 1 family including HUD REO s 2-4 family Minimum $5000 no maximum up to FHA maximum loan amounts

4 Repair types No minimum, maximum rehab is $35,000 including any fees not paid out of pocket Structural and non-structural Landscaping or site amenities No outbuildings Non-structural only No landscaping or site amenities No outbuildings Plan review/specification of repair Required by HUD consultant Consultants work write-up must be detailed and include estimates for work and labor Buyer s estimates must be in line with consultant s estimates. The higher of the 2 will be used in calculating maximum mortgage amount Contingency Reserve No plan review or consultant required 15% minimum required If consultant quote is higher, their quote must be used 10% minimum required

5 Draw disbursements 15% required if utilities are not on or if property is vacant Consultant inspects property and identifies percent complete Maximum 5 draws 10% holdback on each disbursement Checks cut in contractor AND buyers name First draw limited to 50% of total repair costs including labor Maximum 2 draws No holdbacks Checks cut in contractor AND buyers name No more than 2 payments per specialized contractor Inspection and title updates Required prior to each disbursement 2 title runs, one at 50% of renovation dollars advanced and one at final draw Inspections are case by case depending on the number of contractors Certificates from cities are acceptable in lieu of Only 1 title update at final draw Homeowner-Contractor agreements Required for each contractor

6 If using a GC, then only need contract with GC Mortgage payment reserve Required for each contractor In using a GC, then only need contract with GC Up to 6 months of PITI can be financed if property is not habitable during construction Borrower must move into property within 30 days of closing. Mortgage payments may not be escrowed. Misc. Repairs not acceptable Luxury items and improvements/repairs that do not become a part of the permanent part of the property are not eligible i.e. Barbecue pits Bathhouses Dumbwaiters Exterior hot tubs Saunas Spas and whirlpool baths Outdoor fireplaces or hearths Photo murals Swimming pools (repair may be eligible under the full program only Television antennas

7 Satellite dishes Tennis courts Tree surgery Alterations or additions to provide for commercial use Qualifying guidelines Same as regular FHA with the exception of LTV maximum LTV 110% 640 minimum credit score Construction and Land Loans These are not products offered by the secondary markets, i.e. FNMA but are offered at several lenders as a portfolio loan. Guidelines will vary lender to lender. Land Loan Basics Amortized over 20 years I year ARM Balloons in 5 years 30% down payment up to $400k loan, 40% down for loan amounts $401k - $500k Maximum loan $500k Lot must be buildable Minimum credit score 640 Land requirements Proof that lot is an Approved Building lot is required via a Building Permit, letter from the Town or an Approved Subdivision Map showing the lot Deed restrictions must evidence conformance with surrounding areas Lots Must be on a town accepted road and zoned residential

8 Certified survey (required for NY properties only / Title Insurance Policy must make No Exception To Survey for all other States) Lot should be located within reasonable proximity to the Borrower s employment The property must be accessible from the street or there must be a recorded easement granting access Leasehold estates are not eligible Construction Loans A mortgage given for the construction phase, 12 or 18 month construction period depending on lender that will turn into a permanent mortgage once the property is complete. Eligible properties 1 unit single family residence Modular (prefabricated) Owner occupied and second home Eligible transactions Purchase property that requires rehab or improvements Refinance including paying off any liens on property May be used to build new or rehab existing property Documents required 1 complete set of plans with elevations (drawings) and specifications necessary for the appraiser to determine value Builder/homeowner contract LTV and debt ratios Most lenders 80% 90% available LTV is based on after improved value Typically debt ratio is 41% - if current residence will be sold prior to completion their current housing expense will not be included in debt rations for primary residence Process Loan closes after construction loan is processed before work begins Permits are required before first disbursement At closing all liens on property will be paid Monthly payments are interest only based on monies disbursed During construction taxes and insurance are paid for by the borrower At modification, converting the loan from interest only payments to principal and interest payment when the property is complete, escrows will be added Home Equity Lines of Credit great tool to use to bring a property into a more marketable condition yielding a higher price for the seller or putting the property into an acceptable condition to sell. Guidelines vary lender to lender. Terms

9 Variable rate tied to prime rate Revolving line of credit Pay interest on monies owed not on credit line available Eligible properties Single family and condos 2-4 units Eligible borrowers Owner occupied Second homes Investment properties Misc Most lenders will not allow them on a property on the market for sale Most lenders have an early prepayment penalty Typically lenders pay costs associated with the application