Enhancements have been made to the Federal National Mortgage Association program for purchase and refinance loans that include funds for home improvements.
The Washington-based secondary mortgage lender reports that interest in renovation financing has increased. So it is enhancing its HomeStyle Renovation program.
HomeStyle mortgages
enable borrowers to include funds for home improvements in home purchase financing or in refinances of existing home loans.
Fannie Mae discussed the details Tuesday in Selling Guide Announcement SEL-2018-02.
Funds can be included in the loan amount to
cover the costs of repairs, remodeling, renovations or energy improvements to the property.
According to the government-controlled enterprise, the maximum allowable loan-to-value, combined LTV and HCLTV ratios have been increased to 97 percent for fixed-rate loans on one-unit properties
that are the borrower’s principal residence. The ratio applies to purchase transactions and limited cashout refinances underwritten through Desktop Underwriter.
Funds available for eligible renovations are limited to 75 percent of the lesser of the total acquisition-and-renovation costs or the as-completed appraised value.
Manufactured homes are now eligible for HomeStyle mortgages as long as the improvements do not require structural changes. Total renovation funds are limited to the lesser of half of the as-completed appraised value or $50,000.
A requirement that the renovation must add value to the property has been removed.
Approved HomeStyle lenders can deliver the loans prior to completion of the improvements subject to limited recourse and additional requirements. Lenders that are not approved for HomeStyle can deliver loans after the renovation is complete.
The policy changes are voluntary and can be implemented immediately. The changes become mandatory on Sept. 1.
New case files submitted to DU Version 10.2 on or after the weekend of March 17 are impacted by the changes.
