If you are considering buying a foreclosed fixer home as (a) your primary residence, (b) a second home, or (c) an investment property, there may be some new financing alternatives now available to you. I just learned about this from a mortgage broker associate with whom I work on HUD homes. He tells me that Fannie Mae has introduced a new program which I believe is called the “Fannie Mae Homestyle Renovation” program.
As I understand the program, it works something like this – basically a qualified borrower for a primary residence can purchase a property and within the same transaction, also finance renovations which could include repairs and even new construction up to 50% of the value of the home when completed. For example, if the selling price of a foreclosed house is $300,000 and the borrower needs $110,000 more to make needed repairs and improvements, the value of the finished house would be $410,000.
Utilizing this program, the borrower could finance the initial loan and required repairs/construction with as little as 10% down ($41,000 in the example). The work must be done by a professional contractor, and there are draws that are taken upon completion at certain milestones as the construction work progresses, just as with a normal construction loan. My understanding is that presently the maximum loan amount in this Fannie Mae program is the conforming limit of $625,500.
The specific terms of such a loan would vary depending upon whether you are buying your primary residence, a vacation home, or an investment property. In each case, the initial purchase price of the property plus all or part of your renovation costs can be included in the loan. Of course, you’ll need a lot more information on this program before you can assess whether this financing alternative might work for you.
If you have shopped around for bank owned “bargain properties”, you already know that most are found in a very sorry state of disrepair and will need a lot of work. This financing program could be a great way to buy a bank owned, distressed fixer upper and obtain the funds to fix it up, all in the same transaction. As always, if you want information on HUD homes, or if you want more information on this financing program, e-mail me or give me a call.