HomeStyle Renovation Mortgages

HomeStyle Renovation provides the compelling opportunity to combine the funds to purchase (or refinance), along with money to improve the home, in a single loan

In today's competitive real estate market, this is extra meaningful because it can give you the opportunity to consider homes most people ignore -- homes that need updating to fit your vision, that need improvements, or even homes that couldn't qualify for normal financing because of major condition issues.

How much can you receive for these repairs? The amount depends on a combination of the repair cost and the appraiser's evaluation. The appraiser performs an appraisal that anticipates the home value as if the repairs were complete. You can think of it like this -- the appraiser completes the appraisal "pretending" the repairs are already complete. 

In reality, he or she is not really "pretending". They make it clear the repairs or improvements are not yet done, and that the opinion of value is "subject to" completion. That's actually a term for this type of appraisal -- a "subject to" appraisal. The idea is that the appraised value anticipates the repairs, and it's based upon what it would be if they were complete. 

What HomeStyle Mortgage Financing Can Mean to You

Most homebuyers today feel frustrated with the amount of competition and lack of homes for sale.

 

HomeStyle allows you to consider homes and most people are overlooking, while at the same time get the chance to improve a home to fit your vision.

It also means you don't need the funds to complete the repairs yourself. You don't have to be a home repair expert. You just need to find a contractor with which you feel comfortable, and they need to be available to understand your vision and estimate the costs of the repairs. 

This also allows you to purchase or refinance a property that would otherwise by unfinanceable and transform it into the home of your dreams.

If you already own a home, this program can also allow you to refinance the existing mortgage (if you have one) while getting the funds to complete the repairs.

How Much Money Do I Need to Buy a Home with HomeStyle Financing?

With HomeStyle Renovation, borrowers can purchase homes with regular downpayment options (5%, 10%, 15%, 20% for a single family) based on the purchase price of the home plus the cost of repairs.

 

Assuming the home appraises sufficiently, you do not need your own funds to complete the repairs!

How Does a HomeStyle Mortgage Work? Give Me an Easy Illustration!

Okay! Here you go....

(+) $70,000 purchase price (the price in your sales contract)

(+) $30,000 cost of repairs
(=) $100,000 "total purchase price" (the price on your loan application)

The minimum down payment on HomeStyle is typically 5% down.

Assuming the home appraised at $100,000 or more, the minimum down payment would be $5,000.

The loan provides the funds needed for repairs. Those funds are set aside in a special escrow account. As the repairs are completed, money is taken from the escrow account and sent to the contractor. The concept is pretty simple!

Remember, you don't need to figure this out by yourself. We're here to help you explore your options. If you plan to search for a home within the next three months, get in touch through Get Started Online.

How Does the HomeStyle Mortgage Process Work?

  1. You find a home that needs work
     

  2. You write your offer to purchase for the normal price you want the seller to receive. Allow for more time to complete the extra steps of this process. Allow more time for inspection and appraisal. You can add a contingency for the subject-to appraised value to be equal-to or greater than the purchase price plus cost of repairs 
     

  3. Get a quote for the repairs you want. We need the quotes prior to ordering the appraisal, and we'll pass them along to the appraiser to factor into the value.
     

  4. For financing purposes, we consider the home value to be the lower of a) the purchase price, plus cost of repairs; or b) the appraised value.
     

  5. Complete the remaining steps of the loan, like normal, and close.
     

  6. At closing, we put the money for the repairs into a special escrow account.
     

  7. As you complete repairs, the appraiser will return to confirm they're complete in a workmanlike manner. The contractor will then receive the appropriate disbursement.
     

  8. If there is any money left over in the account after the repairs are complete, the funds will be used to pay down your loan balance. You can never receive cash in-hand, but the remaining money isn't lost -- it's used to reduce your loan.

I'm a Nerd and Like to Read Stuff Online. Tell Me Details about HomeStyle!
 

Some people just can't get enough information! However, until we gather some information from you, it's all fairly abstract. If you plan to search for a home within the next three months, please get in touch through Get Started Online. Then we'll be able to help you explore your options in a more meaningful way.

 

Until then, we can keep providing more info! Here are some additional details --  

  • You should definitely talk with us early on -- to help plan, prepare, and understand the program -- before you write your offer to purchase.

  • Available on 1-4 unit properties (single family, condo, or multi-family)

  • Multi-family (2-4 units) require higher down payments -- as normal for Conventional

  • Available on primary residence, secondary residence (single family), and investment properties (single family) with various downpayment requirements 

  • Minimum of $50,000 loan amounts

  • Construction Survey is needed if the footprint of the home is changed and / or there is an additional structure to the home that is being added (i.e. pool, deck, garage, out building, etc.) 

  • Funds for the renovation (contingency reserve, soft costs and payment reserves) cannot exceed 50% of the estimated completed value of the home

  • If the home will be uninhabited for repairs, you can finance payments

  • A contingency reserve (cushion) is required for a 2-unit, second home or 1-unit investment property. The contingency reserve is equal to 10% of the cost of the renovations. Contingency reserves must be deposited in the renovation escrow account, to cover unforeseen problems. You may want to factor that into your appraisal contingency as well (to make sure the home appraises high enough to cover this reserve)

  • Sweat equity is not eligible. 

  • Sellers can credit up to 6% of the purchase price for closing cost and prepaid items (these items normally total far under this amount, so talk with us before you propose an amount in your offer to purchase)

  • If you're buying within a PUD (Planned Unit Development) or condo, the repairs must be authorized by the owners association

  • Construction should begin within 30 days of loan closing and MUST be complete within 6 months or LESS. At no time should construction cease for 30 consecutive days, unless construction is halted due to inclement weather.

  • There are no draws allowed at closing. They will be provided in arrears with a 10% holdback on each draw. The contractor will determine the amount of draws that are required and at what point a draw may be taken. 

  • Once the file is closed it will go through our post close process and could take several weeks before draws are available. Once set up, the borrower and contractor will receive a welcome email with draw instructions. 

  • Minimum credit score of 640 (different minimums may apply depending on other factors such as debt-to-income ratio and downpayment level

HomeStyle Renovation Vs. FHA 203k Loans

Let's compare/contrast these two renovation programs across four key areas:

  • Ease of construction/draw process - Generally, HomeStyle Renovation is easier than the regular FHA 203k program because it doesn't require a consultant to approve/review each repair. But it's worth pointing out that FHA 203k has two versions -- regular (which requires a consultant to approve/review repairs) and Streamline (which does not require a consultant). In this sense, HomeStyle renovation is more similar to the Streamline version of FHA 203k. HomeStyle Renovation is a bit more flexible on the type of repairs allowed, as long as the total cost is justified by the subject-to appraised value.
     

  • Contractor identity and relationships - HomeStyle Renovation is easier than FHA in terms of something called "Identity of Interest". This refers to whether you have any relationship with the contractor, and it's something that you and the contractor must disclose in an affidavit. For example, if the contractor is a relative, HomeStyle will likely work while FHA will not.
     

  • Cost - We can help evaluate the overall long-term cost differences with a Total Cost Analysis. Generally, people with a normal downpayment (15-20%) will opt for HomeStyle while it's a closer call between HomeStyle and FHA 203k for people with a smaller downpayment (3.5% - 10%). Several other factors (such as credit score) also play a part, so let's discuss further!
     

  • Loan amount - HomeStyle is based on Conforming loan limits (up to $454,100) for a single-family home, while FHA loan limits are considerably more restricted. So you have more flexibility in this area with HomeStyle.

Let Us Help You

Here are a few advantages you'll receive by working with us... 

  • Cherry Creek Mortgage Company has a trained renovation team and project experts that is dedicated to this type of financing

  • Greg's team is experienced with this type of financing and will guide you through the process from early planning to closing

  • We will work directly with your contractor for draw requests and payment

  • We offer competitive pricing and excellent customer service

  • Our VIP FasTrak program will help to offset some of the extra time involved in the closing process for this type of loan. Since you'll always have a longer appraisal timeline and closing timeline with HomeStyle Renovation, it's even more important to get a head start with VIP FasTrak

Thanks for All the Info About HomeStyle! How Can I Get Started?

If you haven't watched the VIP FastTrak video yet, you should watch that! This head start program is important for all buyers, but especially for buyers who want to use a renovation loan program.

If you're targeting a purchase date within the next three months, the clock is already ticking! Go to our Get Started Online page as a first step. This will help us get to know your basic financial situation so we can identify suitable options and have a meaningful discussion.

 

If you're beyond three months away, please reach out through the contact form below, and we'll set up a free, informal telephone consultation to give you some ideas to help you plan and prepare ahead of time.
 

I'm beyond 3 months away, but would love to talk when you have a chance!

I'm outside WI but love your amazing information. Please pass my info to a colleague who works with this type of financing in my state!

Greg Schliesmann
Branch Manager, NMLS# 234288
Cherry Creek Mortgage Co., Inc

Greg Schliesmann
Branch Manager, NMLS# 234288
Cherry Creek Mortgage Co., Inc

1033 N Mayfair Rd, Suite 100
Wauwatosa, WI 53226

Tel: 414-617-1756

1033 N Mayfair Rd, Suite 100
Wauwatosa, WI 53226

Tel: 414-617-1756

Free Access to Greg's Valuable Video Series

Five Strategies to Stand Out from Homebuyer Competition and Get Your Offer Accepted!

Free Access to Greg's Valuable Video Series

Five Strategies to Stand Out from Homebuyer Competition and Get Your Offer Accepted!


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Copyright ©2018 Cherry Creek Mortgage Company & Greg Schliesmann for CCMC, Inc.

Cherry Creek Mortgage Co., Inc. NMLS #3001. All Rights Reserved. Some loan products may not be available in all states. Terms, rates, and fees subject to change. Please speak with one of our loan originators for more detail.