Posts Tagged ‘Fannie Mae Homestyle’

Flip this Alpharetta Foreclosure

May 3, 2011

I – Clay Jeffreys and overseer of this blog 🙂 – thought it would be great to include this post from regular guest contributor Van Purser. While this blog details flipping a home, it also provides some insight into work that can be done on a home as a primary residence or investment property using the Fannie Mae HomeStyle loan I discussed in an earlier post.

In our last newsletter we reported on the status of a HUD foreclosure we were planning on purchasing to renovate and sell.  Since that time the renovation was completed and the property was resold and closed on April 12th.

We felt that this particular home, located in The Hunters Forest subdivision, off of Jones Bridge Rd, should sell for the mid to upper $140’s.  We had originally planned on adding a sunroom to elevate the price to the mid $150’s, but decided not to.  We felt that with our purchase price of $71,000 we would still be able to make a profit without adding the sunroom.

Our plans were to close just before Christmas, and to begin the renovation shortly after the beginning of the year, so that we would have it ready to return to market by March.  Instead we closed on November 30th, and started the renovation immediately, in order to provide work for our crew in advance of Christmas.  It worked out great. We finished on Christmas Eve.  Three weeks, and over $32,000 later we were finished and ready to put property on the market.

We started out $154,900, but after a month realized that the market would not support it and reduced the price to $149,900.  This increased activity, but did not yield a contract.  We continued to monitor the market and decided to reduce the price again to $144,900 after a couple more weeks.  Within a few days we were under contract at $142,000.  Not exactly what we had hoped for, but still worth the effort.

We were so please with the renovation, and the BEFORE & AFTERS show the transformation that took place.  One thing we did differently on this home was re-trim the entire home.  This added a lot of character to the home.  Another thing we did was add the dividing wall between the living room and dining area, to provide some separation.  Also, we had to add a new deck and start over in the bathrooms.

Homes like these are available for purchase, and will provide an opportunity to improve the neighborhood and to make a profit.  If you would like to try one, let me know.

Flip this house

March 22, 2011

This home is a recent foreclosure we purchased in Lawrenceville.  It was actually listed through our Multiple Listing Service and was originally on the market for $69,000.  We made an offer for $58,000 which was accepted. The inspection revealed a couple of structural issues that needed to be addressed, so we amended our purchase price to $54,800.  For a complete Before & After click here or on the image below.

The renovation took a longer than usual, three weeks instead of two, but not bad considering the amount of work that was done.  The largest contributor to the extra week was the amount of landscaping that was needed.

The yard had eroded over the years due to water run off.  We decided to remove several trees in the front yard, add a rail road tie retaining will in the rear yard and front yard, and we added a tie wall and walk way on the right side.

Cris Abbott, a local contractor, did the work at a very reasonable price. Additionally Cris piped all of our downspouts away from the house.  The balance of the project included the normal things you would expect in a house with deferred maintenance; a new roof, siding repair, new gutters, exterior paint, and we had to side the utility building before painting.

On the inside new light fixtures, plumbing fixtures, new HVAC, plus appliances, painting, counter tops and new vanity tops plus refinishing the hardwoods completed the make over.

By the way; if you have extra money now is a good time to pick up some REALLY GOOD DEALS to resell or to rent out.

Van Purser is a licensed real estate broker in Georgia.  Since1981 he has successfully purchased and renovated over 400 homes.  His expertise is in the area of foreclosures, rehabs and fixer uppers.  Additionally, he has represented hundreds of clients over the years as a broker with Metro Brokers, RE/Max and now with his own firm.  He and his wife, Jeanne, who is also a broker, have been married since 1977.  Van can be reached at 770-623-3313 or by email VanPurser@VanPurser.com

Contingency Reserve Requirements on Renonvation Mortgages

March 15, 2011

I’m staying with the “renovation” theme from my last several posts. This week I want to address a common question I get regarding one of the requirements on the Fannie Mae HomeStyle Renovation Mortgage, Fannie Mae HomePath Renovation Mortgage, and the FHA 203k Mortgage… “Why do these programs require a 10% contingency reserve?

The first thing I should do is define a contingency reserve. Fannie Mae and HUD (FHA loans) require a 10% contingency reserve on these renovation mortgages for unforeseen costs associated with the project.

The last thing anyone wants is to get into a renovation project on a tight budget with no additional assets and an unexpected problem occurs. Some potential issues that arise during a renovation cannot really be accounted for until the process is underway. That is why the 10% contingency requirement exists.

The contingency reserve is not an option. Since this is the case, a better question becomes “what happens to the 10% contingency reserve if it isn’t used?

As anyone who has gone through a renovation project on a home knows, most of the times costs end up going over budget, so it probably won’t be a problem. 🙂 In the event there are funds remaining, usually one of the following occurs with these three programs (203k, HomeStyle, HomePath):

  • additional work on the home – in some cases, the contingency reserve could be used to fund additional work on the home. If this isn’t allowed, then the other option is a…
  • principal reduction – the remaining funds are used to pay down the loan balance. Depending on the renovation program (and lender originating the loan), the borrower could request a recast of the mortgage. In other words, re-amortize the mortgage to lower the monthly payment
  • receive the contingency reserve as cash back – this is typically not an option for the borrower

Contingency reserves can be annoying, but they are definitely needed. As previously stated, the last thing anyone wants is to get near the end of the project and run out of money. What happens then? That is a scenario you never want to face!

Fannie Mae HomeStyle Renovation Mortgage

March 8, 2011

I know, I know, I know… a LOT of posts sounding eerily similar these days. First it was the Fannie Mae HomePath Mortgage for foreclosures. Then I discussed the Fannie Mae HomePath Renovation Mortgage (also for foreclosures). I even referenced the FHA 203K Streamline mortgage post I wrote in 2009.

Today, the rehab discussion moves to the Fannie Mae HomeStyle Renovation Mortgage. Think of the HomeStyle as being a cousin to the HomePath because they do share features:

  • all renovations must be completed by a state licensed contractor
  • structural repairs/additions can be made to a home
  • luxury items such as swimming pools, hot-tubs, fences, etc. are allowed
  • all renovations can be purely cosmetic (new paint, carpet, tile, appliances, etc.)
  • a 10% contingency reserve is required
  • program for primary residences and investment properties

They share features, but there are some really important differences:

  • there is a $5,000 minimum renovation requirement
  • the maximum renovation amount is 50% of the “after completion value”. If the value is $500,000, then up to $250K can be put into renovations. An amount of up to $100K can be put into a home completion value at $200,000
  • can be used to purchase a property or refinance one already owned
  • minimum down payments are increased (compared to HomePath) to 5% for a primary residence and 25% for an investment property
  • 620+ credit score required (a larger down payment may be required for scores under 680)

Using the HomeStyle program, buyers/home owners can make dramatic changes to a home. The program is ideal for individuals looking to add on another story, make a significant addition, or completely gut the inside of a home.

As with all loan programs, to get started, one must be prequalified. If the property is in the state of Georgia, I’d love to start the mortgage process with you. All you need to do is contact me. I can answer questions about the HomeStyle proram (or any of the rehab programs mentioned in this post), and we can get the prequalification process started!

Fannie Mae HomeStyle Rehab Loan

May 21, 2010

I regularly receive requests for loan programs that will allow borrowers to make repairs on a home and roll those costs into the loan. Due to the financial crisis and the risky nature of these loan programs, conventional rehabilitation loans virtually disappeared.

The only consistent option was the FHA 203k program, which is a great loan program, but only allows cosmetic/non-structural repairs on a buyer’s primary residence. It would be great if there was a program that allowed both buyers and investors the flexibility needed to do more than just cosmetic repairs… and now there is!

Introducing the Fannie Mae HomeStyle loan program. This is a renovation program like the FHA 203k program, and they share some similar traits.

  • Both programs allow for cosmetic remodeling/repairs
  • The funds needed for the work on the property is rolled into the loan
  • Available on primary residences for purchases & refinances
  • Work must be completed by a licensed contractor

There are similarities, but definitely note the differences. Fannie Mae HomeStyle:

  • Available for borrowers (10% minimum downpayment) and investors (20% minimum downpayment) on purchases and refinances
  • Structural repairs/changes/improvements allowed
  • Luxury items such as pools, hot-tubs, fences, etc. allowed
  • minimum repair amount of $5,000 required

FHA 203k:

  • only 3.5% down payment required
  • No minimum repair amount required
  • Available for primary residence purchases & refinances only
  • No structural repairs/upgrades OR luxury items allowed
Who can benefit from either of these loan programs? Anyone looking for a loan program that will allow you to knock out a wall or two OR investors looking for a way to cover remodeling costs OR even someone looking for a way to pay for carpet and paint in their new home.
If this is you, program options are now available! Don’t hesitate to contact me to learn more or get prequalified for either of these great programs.