Renovation Financing

Renovation Financing

Understanding the benefits and process of a Residential Renovation Loan for Realtors

What , Why, HowWhat is a Renovation loan and how does it work?

Why do you need to know about Renovation loans?

How will Renovation Loans help you sell more properties ?

Accomplish two needs with one loan

Renovation financing allows a borrower to Purchase or Refinance a home in less than ideal condition and make the improvements immediately after closing.

A Sale may close with some or NONE of the Utilities/Systems on prior to closing !!

The cost of the renovation is rolled typically into a 30 year mortgage making it very affordable.

When you need it ?!1!When Selling or Listing a property where the need for repairs is obviousWhen you have an Appraisal with repair conditions subject to final inspection, prior to closing. When you want to sell Vision !

Who can benefitHomebuyers: Can purchase homes in less than ideal condition (as-is) and address the problems immediately after closing.

Homeowners: May upgrade/modernize or expand to increase value ( to stay in or list for resale)- Love it or List it ! . Equity loans are very hard to get and credit cards are too expensive.

Cont.Real Estate agents: Sell dated and properties needing repairs by helping potential buyers envisioning remodeling possibilities. . Sell a Vision- what it could be, not what it is. Let the buyer create their Dream Home now.

Negative Listing notes: REOs, Short Sales, HUD properties, as-is, cash only, CO responsibility of buyer.All can be financed with a Renovation loan easily .

Cont.Second Home owners and buyers: Can take advantage of the program.

Investors can purchase homes in need of repairs, not limiting them to pay cash (this makes it possible for you to sell more units to an Investor freeing up capital to make multiple sales). They can also upgrade a property they own for increased rent rolls or to list for resale.

QualificationOwner occupants 3.5%-5% down minimumSecond homes 10% downInvestors 20% downOr for a refinance with similar equity positions after the home in renovated ( Appraisal is on the after improved value, not the way it is currently. Make the property ready for resale at the maximum price.)

The word ButWhen

Purchase Calculation EZContact Sales Price $200,000.00Total Renovation Costs ( Including Contractors Estimate and all other financed fees such as Contingency reserve, inspection. Title updates, other fees. Etc..) $55,000.00 Total Acquisition Cost $255,000.00Loan Amount @ 95% LTV $242,250.00

Renovation Loan StepsBorrower contacts a Renovation specialist: loan options are discussed and preapproval decision is made.

FNMA /Conventional vs. FHA/Government. (Possibly adding the words 203k or Homestyle)

Contract of Sale is written (Purchase)/using actual sales price, type of financing and down payment % off of the Sales price, loan amount is Sales price minus down paymentThey same way you normally write it up.. No Sweat !

Steps

Work write up/estimate Contractor or HUD Consultant submits to the Lender. ( 1-2 weeks from Contact acceptance)

Appraisal is ordered with the Estimate to Maximize value (After Improved Value)

Finalize commitment and clear conditions if any.

StepsLoan closes/funds prior to any work beginning.

Repairs funds are held in an escrow account and disbursed base on specific loan guidelines (usually after an inspection/up to 5 draws). Be sure your borrower deals with a Lender who administers the draws directly to avoid payment delays. MM handles and holds all escrowed funds, available 48 hours post closing !

VISIONAfter Home Loan

Benefits to RealtorsrBBuyers expect much more today, yet most agents havent re-tooled or systematized their buyer processes to deliver that "value-added" service that buyers demand

Discussing Renovation programs is an added Value service.

Using a Renovation Loan actually adds value ($$$$)sr that "value-added" service that buy

Benefits to Realtors

Attract more potential buyers, those looking for fixer uppers Owner Occupants and First time Investors are out there, use these products to increase your Sales/Listings.

Overcome buyers cosmetic objections (Vision) ---------How many hours have you spent driving homebuyer from listing to listing ?

Benefits to Realtors

The perfect Loan Product for properties being sold AS-IS-REO and short sales.

Realtors are paid when the loan closes, not after repaired

Increases your referral base utilizing niche products (Buyers selling you by word of mouth about immediate equity (at times) and the newer beautiful home)

Benefits to Realtors

When its time to re-list, the property is already updated

Wouldnt be nice to re-List the home in 2020 already updated instead of you having to List a REALLY outdated listing (Its your headache now)

Cont.

Helps you sell or list properties that need TLC

Increase your listings (acquire those previously on the market for an extend period do to improper marketing)

Market your current listing using proven methods, working with a Renovation Specialist. (Proactively doing a feasibility study) * Change the Realtor notes, add renovation financing available-Contact Listing Agent ! Speak with your Renovation specialist for details

Realtor MarketingYard signs (before and after the sale)Open house flyers and good faith scenarios, using the Vision FlyerFeasibility studies from consultant (available for a low fee)Take before and after pictures to add to your Sales portfolio.Multiple other flyers and trifolds available

Think outside the boxHomes can be knocked down and rebuilt using part of the existing foundation

Homes can be raised and renovated to meet new FEMA requirements

Homes can be made larger/additions.

Think outside the boxModular homes can be used with the programs

An existing home can be moved to another lot

Close loans with current/possible appraisal conditions (converting them to a Renovation loan and closing as-is with the same lender !) MM is your 1 stop shop. 203b can be closed using the 203k fast an easy if need be when is starts at MM.

Renovation TrendsRemodeling market totaled nearly $298 Billion in 2012

Estimated to grow at an annual rate of 3.5% from 2013 to 2015

Median age of housing stock is currently 35 years +account

Homes account for over 22 percent of national energy usage, and about half of the national housing stock was build before 1973.

Median square footage of new homes today is 2,280, compared to 1,595 for homes built in the 1980sMedian square footage of new homes today is 2,267, compared to 1,595 for homes built in the 1980s

Remodeling market totaled nearly $286 Billion in 2009Estimated to grow at an annual rate of 3.5% from 2011 to 2015Median age of housing stock is currently 35 years +When it is time to re-list, the home is already updated

Renovation TrendsTrade-up buyers spend 22% more on home improvements than first time homebuyersIncome bracket: 80K to 120K

Expenditures by category:Kitchens - $16Baths - $11Additions/alterations - $28Systems - $23Replacements - $44 (2012 in Billions)Homes account for over 20 percent of national energy usage, and about half of the national housing stock was build before 1973.Median square footage of new homes today is 2,267, compared to 1,595 for homes built in the 1980s

Renovation TrendsReturn based on type of improvement: Bath 64%Kitchen 69%Master Bedroom 63%Basement 70%Deck 73%(National Average)Return based on type of improvement: Bath 64%Kitchen 69%Master Bedroom 63%Basement 70%Deck 73%(National Average)

Renovation TrendsIt is expected that the remodeling market will grow by roughly 44% between 2013 and 2015It is expected that the remodeling market will grow by roughly 43% between 2010 and 2015

Program History

1970s FHA 203k (Full)

1990s Fannie MaeHomePath & HomeStyle

2000s FHA 203k Streamline

..HHistory of the programs 1970s FHA 203k 1990s Fannie MaeHomePath & HomeStyle 2000s FHA 203k Streamline

Renovation Mortgage Types

FHA 203k Full/Consultant KFHA 203k Streamline KHomePath Renovation (Ended 10/6)HomeStyle Renovation

FHA 203kThe Full 203k is very similar to the 203k Streamline. There aThe Full 203k is very similar to the 203k Streamline. There are only a couple key differences with this loan product.

e on Any Structural Repairs. Something as big as jacking up your house to replace the sill plate falls under the Full 203k. Moving or altering a load bearing wall. So would knocking the house down to rebuild it, as long as you leave part of the existing foundation. y a cCost. The Streamline is $35,000 MAX (Line B14 on the Maximum Mortgage Worksheet). If your repairs and renovations go above $35,000 then you need to get into a Full 203k loan.

HUDHUD Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write-up before the appraisal Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write-up before the appraisal le key differences with this loan product. Structural Repairs. Something as big as jacking up your house to replace the sill plate falls under the Full 203k. So would knocking the house down to rebuild it, as long as you leave the foundation. HUD Consultant. The Full 203k requires a HUD consultant on the loan. This person draws up the paperwork and works with you and your contractors to get a write-up before the appraisal. Cost. The Streamline is $35,000 MAX (Line B14 on the Maximum Mortgage Worksheet). If your repairs and renovations go above $35,000 then you need to get into a Full 203k loan.

Full 203k/Eligible Repairs Structural alterations and additions Garage (attached/detached) Remodel kitchen or bathroom Install appliances Changes to eliminate deterioration and reduce maintenanceModernize..plumbing/heating/air conditioning/electrical systemsRepair swimming pool (up to $1,500)

Full 203k/Eligible Repairs Install or repair roofing/gutters/downspout Install flooring/tile/carpet Energy conservation improvements Major landscaping/decks/fencing Improvements for accessibility Interior and exterior painting Improvements that are a permanent part of the real estate

203k Ineligible Repairs New tennis court Gazebo or bathhouse Additions or alterations to provide commercial use Photo mural Satellite dish New swimming pool Outdoor fireplace/hearth/barbecue pit

Streamline 203k

WHATS THE DIFFERENCE?The Streamline (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. The Streamline (k) program includes the discretionary improvements and/or repairs.

Streamline Eligible RepairsRepair/Replacement of roofs, gutters, and downspouts Repair/Replacement/Upgrade of existing HVAC systems Repair/Replacement/Upgrade of plumbing and electrical systems Repair/Replacement of flooring Minor remodeling such as kitchens which does not involve structural repairs

Streamline Eligible Repairs

Painting, both exterior and interior Weatherization, including storm windows and doors, insulation, weather stripping, etc. Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/ dryers, dishwashers and microwave ovens after the first $5,000.

Streamline Eligible Repairs

Accessibility improvements for persons with disabilities Lead based paint stabilization or abatement of lead-based paint hazards (HUD properties only) Repair/Replace/Add exterior decks, patios, porches

Streamline Eligible Repairs

Basement finishing and remodeling, which does not involve structural repairs Basement waterproofing Window and door replacements and exterior wall residing Septic system and/or well repair or replacement

Streamline Ineligibles

Major rehabilitation or major remodeling such as the relocation of a load bearing wall New construction (including room additions) Repair of structural damage Repairs requiring detailed drawings or architectural exhibits

Streamline Ineligibles

Landscaping or similar site amenity improvements Any repair or improvement requiring a work schedule longer than six months Rehabilitation activities that require more than two payments per specialized contractor

FNMA HomeStyleMax Loan To Value (LTV)

Purchase 95% Owner Occ. (SFR only) Purchase 85% Owner Occ. (2 units) Purchase 75% Owner Occ. (3-4 units) Purchase 90% Second Home (SFR only) Purchase 80% Investor (SFR only) Purchase 90% Second Home (SFR only) Purchase 80% Investor (SFR only)

HomeStyle The loan amount is based on LTV derived from lesser of:

TOTAL acquisition cost including all construction related expense

Or from the as completed value of the home

HomeStyleMinimum Credit Score 660 Owner Occ and 2nd Home 660 (if self-employed) 700 (Investor)

HS-Eligible Improvements

There are no restrictions on the type of improvements that can be financed; however all improvements must be fixed to the property and add value.

Luxury items are permitted

New Pool-Deck-Pavers.Vision !

HS-Renovation Amount No minimum renovation amount

Maximum: Funds for renovation (including contingency reserves, soft costs, and payment reserves) cannot exceed 50% of the estimated as completed value.

Common Misconceptionsmortgage program takes too long to close! mortgage program takes too long to close!

Common Misconceptions

Questions https://encrypted-tbn1.gstatic.com/images?q=tbn:ANd9GcQmUaom1CLQB9vBC8rwzisYJPHGDncqggiWCLn9ryH5CMnfvOY7

Thank YouThis educational presentation was presented by:

May Renovation be your Inspiration

Movement Mortgage

Movement Mortgage, LLC is an Equal Housing Lender. NMLS ID# 39179 (www.nmlsconsumeraccess.org) | 877-314-1499. Movement Mortgage, LLC is licensed by AK # AK39179, AL # 21022, AR # 105002, AZ # 918544, CA Department of Business Oversight under the California Residential Mortgage Lending Act # 4131054, "CO Regulated by Division of Real Estate", CT # ML-39179, DE # 012644, DC # MLB39179, FL # MLD200, GA # 23002, ID # MBL-8027, "Illinois Residential Mortgage Licensee" # MB.6760898, IN # 18121, IA # 2013-0023, Kansas Licensed Mortgage Company # SL.0026458, KY # MC85066, LA, MD # 19094, MA Banker & Lender # MC39179, MI # FL0018132, MN # MN-MO-39179, Mississippi Dept of Bankingand Consumer Finance" # 39179, MO # 13-2096, NV # 3402/3401, NJ Department of Banking and Insurance", NC # L-142670, ND # MB102519, OK # ML002646, OR # ML-5081, PA # 34374, SC # MLS-39179, SD # ML.05007, TN # 112748, TX, VA # MC-5112, WA # CL-39179, WV # MB-32019/ML-32020, and WI # 39179. Interest rates and products are subject to change without notice and may or may not be available at the time of loan commitment or lock-in. Borrowers must qualify at closing for all benefits. Movement Mortgage is a registered trademark of the Movement Mortgage, LLC, a Delaware limited liability company.841 Seahawk Cir, Virginia Beach, VA 23452.