Standard Renovation allows for Structural repairs and adding square footage. That means you can add a bedroom, move walls, build a garage or completely tear the house down to the foundation and rebuild if necessary. It requires a HUD consultant to prepare a Specification of Repair. Any home repairs that require drawings or blueprints or require more than two draws must be a Standard Renovation project.
Limited Renovation is for small renovation projects. The program does not allow structural renovations. The loan is set up to replace and upgrade the home and is limited to nonstructural updates. The repairs cannot prevent the homeowner from occupying the property for more than 15 days during the rehabilitation period. Maximum repairs cannot exceed $35,000 including 10-15% contingency and fees.
Some lenders now offer a Limited Conventional HomeStyle as well as Limited FHA 203k loan programs. Make sure to discuss your loan options with your Loan Officer and Renovation Specialist.
Here is the Rule:
EPA's Lead Renovation, Repair and Painting Rule (RRP Rule) requires that Contractors performing renovation, repair, and painting projects that disturb lead-based paint in homes built before 1978 have their firm certified by EPA (or an EPA authorized state), use certified renovators who are trained by EPA-approved training providers and follow lead-safe work practices.
If the home the borrower is buying or refinancing was built prior to 1978 then your contractor in most cases needs to have his lead paint certificate. Here are a few exceptions.
When does my contractor NOT need a Lead Paint Certificate?
Lack of inventory is a common problem for listing agents. A larger problem is the amount of homes that need some work. Move in ready homes can be hard to come by. The homes available need work and all seem to have “issues”. Often there is the misconception these homes are not insurable and cannot be financed so they are often marketed to investors and cash buyers who come in and drive down the price.
This is where Renovation loans can really help. Education is the key to successfully using these programs. Working with a lender that has a dedicated Renovation Specialists on staff is important because the Renovation Specialist can do the heavy lifting on educating everyone so that the whole team knows what the next steps are and what is needed to close the loan.
Listing agents should also consider working with a contractor who understands how renovation financing works. Connecting with a contractor who has design tools to create a blueprint or tour of what the home would look like with the financed repairs allows buyers to see what the home could be. Educating buyers about Renovation loans and what is available is a great way to sell listings.
The answer is YES mortgage payments can be financed, but there are few things to keep in mind if you decide to do it.
Conventional HomeStyle and Standard FHA203k loans allow up to 6 months of mortgage payments to be collected through the loan so that you can live elsewhere while the remodel is taking place and not have to worry about making two housing payments. But keep in mind the home must appraise for enough money to build them in.
The money collected to pay your mortgage during the construction may only be applied to the mortgage while the home is uninhabitable. If the home is livable mortgage payments cannot be paid from the renovation escrow fund. That means if three months of mortgage payments were collected but the home was only uninhabitable two months, then only two mortgage payments can be paid by funds collected in the renovation escrow.
Any unused money that was collected in the Renovation escrow will be applied to the principal of your mortgage at the closeout of the project. This is a good option for those who need to rent another home while the renovation is being done.
Have questions? Give me a call or email me your questions. I would be happy to help.
A new roof may not be a glamorous home renovation but it can really pay off and save a homeowner cash when it comes to homeowners insurance. The majority of home insurance losses happen to the roof due to snow, wind, hail and rain damage.
It’s important to get documentation from the contractor to show that the work was done to code. Waterproofing and higher quality roofing materials can also make a difference in the amount of discount available. Discounts will vary from company to company and state to state so it's important to check for available discounts prior to engaging the contractor.
A new roof is on our list of top renovations that pay off and add value to a home. ick here to edit.
Contractor Approval is one of the key components to closing a renovation loan quickly. A contractor who can get a clear initial bid and is willing to quickly provide updates needed for the loan is essential. The contractor is also required to have licensing, insurance and certifications required by local laws for loan approval. If the contractor doesn't carry insurance or is not licensed in the jurisdiction where the work is to be done then they are not qualified to work on the project ...and the borrower will be scrambling to find another contractor.
What can you do to make sure your client's contractor is acceptable and qualified to do the work?.... Get the contractor approved as soon as possible. Below are the four items that must be provided to your Renovation Specialist as soon as possible for contractor approval.