The home-style renovation loan permits borrowers to include financing for home improvements in a purchase or re-finance transaction of an existing home all within one mortgage. The home-style renovation loan provides a convenient way for borrowers to make renovations, repairs, or improvements, rather than a second mortgage, home equity line of credit, or other, more costly financing method.
The minimum down payment is 5% down for conforming loan amounts ($424,100) and minimum 10% down on high balance loan amounts ($636,150+). Renovation costs are limited to 50% of the “as-completed” appraised value of the home. Renovation costs may include:
- Labor and materials
- Soft costs (architect fees, permits, licenses)
- Contingency Reserve (10% of the cost of labor, materials, and soft costs for unforeseen extra costs in the renovation).
- A payment reserve of up to six months PITI is permitted when the borrower must vacate the property during the renovation. The amount can be financed in the loan amount if the value will support such financing. The reserve is allowed only for the period in which the property is uninhabitable due to the renovations.
The Following Repairs Can be Financed:
• Modernization and improvements to the home’s function
• Elimination of health and safety hazards
• Changes that improve appearance and eliminate obsolescence
• Reconditioning or replacing plumbing; installing a well and/or septic system
• Adding or replacing roofing, gutters, and downspouts
• Adding or replacing floors and/or floor treatments
• Major landscape work and site improvements
• Enhancing accessibility for a disabled person
• Making energy conservation improvements
• Redesigning floor plans, adding bathrooms
• Almost any repair is eligible