What is a Homestyle Loan?
When homeowners in Arizona are looking to improve their homes, they usually opt for the home equity loan for this process. However, these are not the only options available out there, and an open mind is imperative. Arizona mortgage pros have the best loan for a complete renovation or remodeling a new home. An Arizona homestyle loan is a loan that is specifically designed to finance home improvement on a new refinanced property. It is also known as Fannie Mae’s homestyle renovation mortgage and is guaranteed by the government. This loan allows the eligible applicants to include extra funding to their mortgage for home improvements, mortgage refinancing, or home remodeling. This loan offers a more convenient and economical option to investors, home buyers, and homeowners to finance the minor to moderate home improvements. The entire process is conducted under one refinance or a single mortgage and not having to apply for another home equity credit line or second mortgage, or other pricey options, based on Fannie Mae. The loan relies on the ‘as-complete’ future property value once the renovations or repairs have been completed, instead of the ‘present value’ of the property.
Advantages of a Homestyle Loan in Arizona
The top benefit that makes this type of loan an ideal option for many people is that it can assist in making equity in the home almost instantly. The renovation loans can help in catering for energy efficiency improvements, builder and contractor costs, design upgrades, inspection cost, and many others.
With homestyle renovation loans, you will be given a 15-30 year fixed mortgage rates or adjustable rates ARM mortgages. This plan is ordinarily low priced and flexible. You will be in a position to avoid the extra costs and the closing costs that are associated with other mortgage types. Besides, you will pay an initial payment of around 5% and low-interest rates, which typically range between 5-7%.
However, not all banks offer homestyle mortgage loans. The lenders have to be approved by Fannie Mae and must meet all the financial and operational requirements. The borrowers, on the other hand, have to have a minimum of 2 years or more in originating mortgages and renovations in the past five years.
Arizona Homestyle Loan Requirements
The eligible applicants include:
- Individual home buyers
- Nonprofit organizations
- Local government agency
The properties that are eligible for a homestyle loan include:
- Single-family residences
- 2 to 4 primary unit residences
- Manufacturing housing
- Single unit investment properties like co-Ops approved condos and FNMA
It is worth noting that nonprofit organizations must provide additional documents to show that they are capable of repaying the loan. If you are looking to get an Arizona homestyle loan, you must have a credit score of 620 and above, and a debt-to-income ratio of 50%.
The loans need repairs and renovations to be conducted by approved and experienced contractors and architects. It is no wonder that you can be told to present their plans and suggestions before your loan is approved. This is to make sure that the home renovations are economical, convenient, and the documents help lenders to compute the value of the property ‘as completed.’ If funding for the DIY projects for the property is below 10% of the ‘as completed’ worth of the property, then the lender can allow borrowers who are using the owner-occupied home loans which are single-unit homes to complete some of the work.
Besides, the precise timeline of the whole project must be indicated by the general contractors when the plans are being submitted to the lender. The energy efficiency improvements, for example, have to be performed within a hundred days and renovations within six months. Once all this is done, lenders will send their appraisers to inspect the property and report back to Fannie Mae before the contractors are paid. Our Arizona homestyle loan specialists will assist you with any questions and help you make the best decision for your homebuying needs. Contact us today.