Renovation

Financing

Presented By:

Kim Renock, CMB, CRO

What we will Cover

Why Rehab is important What types of renovation

financing are available How it benefits homebuyers &

homeowners How it benefits your cu How it can be used How it works

Why Rehab is Important

At least 30% of listings are foreclosure or pre-foreclosure sales

Over 50% of our existing home stock is over 25 years old

Revitalizing homes helps increase values in neighborhoods even in a declining market

Creating Sustainable Home Ownership

Homebuyer/Homeowner benefits

Buy and make the house a home, with one closing!

Repairs can be minor or major, few restrictions

Up to 6 months to complete the work

Low, Fixed rates

Qualify for the loan based on after completed value

Low Down payments

Benefits to The Credit Union

Seize the purchase business

Develop Realtor Relationships

Full Service Mortgage lending

Neighborhood revitalization

Close before work is complete

Increase Revenue potential

Be one of a Few Lenders offering these

products

What can you do

AND MORE!!!!

Types of Renovation Financing

203K Homestyle Homepath Portfolio

Down Payment Requirement 3.5% 5% 3% ?

Self Help Allowed No Yes* No ?

Owner Occupied Only Yes No No ?

Licensed Contractors Required Yes Yes Yes ?

Minimum Rehab Amount No No No ?

Work Done Prior to Closing No No No ?

Refinances Yes Yes No ?

FHA 203K- Highlights

• Most Common Rehab Loan• Two Types of Loans- Streamline &

Full• Flexible Down Payment Sources• Minimum Credit Scores- Varied• No reserve Requirements• Up to 110% of the After improved

value

Homestyle- Highlights

• Recent Changes• Has Been under utilized due to

previous lack of MI• No minimum repair amount• Repairs limited to 50% of After

improved value• More lenient on type of repairs• Max LTVs O/O-95% SH-80% INV-75%

Homepath- Highlights• Only Available on Fannie Mae Owned Homes• Purchase Only• NO MI• Flexible Down Payment Sources• Limited availability• NOO Co-borrowers allowed• MAX LTV OO-97% SH-90% 85%-INV• Limited to 35% of the AS completed value in

repairs and $35,000

Homepath- pricing

How it Works Member locates property in need of repair

Offer is place contingent on an inspection*

Member provides appraiser a list of the desired repairs

Appraisal is completed, an as-is and an after completed value are determined

Bids for the work are collected from Licensed contractors

Contractors are required to provide proof of liability & workman’s comp insurance and sign a contractor’s agreement

How it Works Underwriter reviews appraisal and bids and determines

maximum mortgage amount Loan is set for closing A rehabilitation escrow is set up to disburse funds upon

completion of work items Depending on the program type a portion of the Rehab

escrow may be released at closing Work is commenced after closing

*Sales Contract

A provision should be included in the sales contract that the buyer has applied for Section 203(k) Financing, and that the contract is contingent upon loan approval and the buyer’s acceptance of additional required improvements as determined by HUD or the lender.

W A R N I N G

It is important to remember that HUD may require additional repairs that the borrower did not plan on doing. The additional repairs must be completed in order to secure the loan.

Real Life Examples

We are closing a deal next week that had fallen apart with another lender because they were requiring repairs to be done prior to closing and the bank who owned the property would not allow the work to be done. By offering the 203K the work can be done after closing and the borrowers were able to add some improvements they thought they would save for over the next 5 years.

Real Life Examples

Two weeks ago we closed a loan for a young man that has been shopping for houses for 2 years. Unfortunately, the properties in his price range all needed work. After seeing many properties and working with 3 different agents over the 2 years in just a few weeks time he found a house and made plans to make it his home.

The Math

Average cost to repair/replace:RoofFurnace/Central AirAppliancesCarpet/flooringKitchen CabinetsWindows

$30,000-$35,000Based average costs for a 1500 sq ft home

To accumulate via savings over 5 years: $500 per month

To finance with the new home purchase:Approx. $160

Questions??

Thank you