1. LenderSelect Mortgage Group Education for Renovation

2. What is a Renovation Loan?
A Renovation Loan allows a borrower to purchase or refinance a home and include the cost of substantial repairs or improvements through a single loan.
This saves borrowers thousands of dollars out of pocket.

3. Types of Renovation loans
There are 2 types of Renovation Loans:
Full
Streamline
The home and the amount of repairs that are needed will determine which one is the best fit.

4. Renovation Loans Repairs are completed after closing
Down payment for purchases are based on the sales price PLUS repairs
Underwritten and processed locally with LSMG
Close within days

5. Full vs. Streamline Full Streamline
$5,000 minimum for repairs/improvements
HUD Consultant required
Architectural exhibits required
Up to 6 months of payments may be financed if the home is not habitable
$5,000 minimum for repairs/improvements
HUD Consultant Feasibility Study
Architectural exhibits NOT required
Mortgage payments may NOT be financed

6. Full vs. Streamline Full Streamline
Repair limit: 50% of the after-improved value for Fannie Mae Homestyle only OR
Repair limit: None for FHA 203(k)
Repair limit: up to $31,100 for both Fannie Mae Homestyle and FHA 203(k)

7. Full Renovation Loans For purchase or refinance transactions
Major repairs and improvements
Loan amount includes repair costs and any:
Inspection fees
HUD Consultant fees
Other fees
10% contingency requirement
$5,000 minimum repair cost

8. Full Renovation Loans - Eligible Work Items
Most work items are allowed on the Full Renovation loan with the exception of a few items
Up to $1,500 for pool repair for existing pools
Pumps
Covers
Pipe replacement

9. Full Renovation Loans - Ineligible Work Items
Any repair or improvements requiring more than 6 months to complete
Luxury item installation, for example:
Pools
Hot tubs
Barbeque pits

10. Full Renovation Draws No draws at closing
Up to 5 draws throughout the renovation process
Draws disbursed upon HUD Consultant’s approval and title update

11. Streamline Renovation Loans
For purchase or refinance transactions
Minor repairs and improvements (upgrades)
Loan amount can include repair costs up to and not exceeding $35,000, value permitting. This amount includes inspections, fees, etc. and 10% contingency requirement
PLEASE NOTE: Work bid amount should not exceed $31,100
$5,000 minimum repair cost

12. Streamline Renovation Loan - Eligible Work Items
Repair, replace & upgrade roofs, gutters & downspouts
Existing HVAC systems, plumbing and electrical systems
Can be combined with an EEM (Energy Efficient Mortgage)
Flooring, paint, siding, windows and etc.
Minor remodeling (non-structural)

13. Streamline Renovation Loan - Eligible Work Items
Weatherization
Storm windows, doors, insulation, weather stripping
Appliances (including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves)
PLEASE NOTE: addition of appliances may not support an increase in appraised value
Improvements for accessibility for persons with disabilities
Lead-based paint, mold, radon abatement

14. Streamline Renovation Loan - Eligible Work Items
Repair/replace/add exterior decks, patios, porches
Basement finishing and remodeling (non-structural)
Basement waterproofing
Defective Drywall
Minor repairs to Well & Septic
Minor cosmetic renovations
Kitchen & bathroom remodeling (non-structural)

15. Streamline Renovation Loan - Ineligible Work Items
Major rehabilitation or remodeling (such as relocation of any load-bearing walls)
New construction (including room additions)
Repair of structural damage (floor joists, girders, beams, piers, etc.)
Repairs requiring detailed drawings or architectural exhibits
Landscaping or similar site amenity improvements
Any repair or improvements requiring more than 6 months to complete
Luxury Items (pools, hot tubs, barbeque pits, etc.)

16. Streamline Renovation Draws
FHA 203(k) Streamline loans have 2 draws:
First draw
The borrower can receive up to 50% of the bid amount at closing
Final draw
Disbursed after ALL work is complete
Homestyle Streamline loans do not have any draws. Total funds are disbursed after ALL work is complete.

17. Required Inspections Termite & Moisture Inspection
Required on all FHA 203(k) loans
Required on Homestyle Full loans (not required on Streamlines unless specified on the sales contract)
Well/Septic Inspection
HUD Consultant Inspection
Required on all Full loans; 203(k) Streamlines require Feasibility Study only

18. HUD Consultant Provides full home inspection
Cost break down and write up of repairs
Provides Minimum Property Requirement (MPR) repairs to ensure the home is:
Safe, structurally sound and sanitary, and
Meets the standards considered acceptable in its locality
List of permits needed for work being performed
Provides three (3) contractor references
Confirms satisfactory completion of work prior to any updates of title or disbursement of draws

19. Contractors Licensed & Bonded
Class A or B
Liability & Workman’s Comp Insurance required
Must provide W9s
Lowes & Home Depot bids are not allowed
Borrower may NOT act as their own contractor.

20. Eligible Properties 1-4 Units Refinance of existing properties
Properties owned free and clear
Existing properties – more than 1 year old
New Construction – if not previously occupied, must have had CO issued over 1 year ago

21. Ineligible Borrowers
Identity of Interest transactions are NOT allowed on any Renovation loan, per HUD
Identity of Interest refers to any relationship (generally based on family ties or financial interests) between:
The seller and purchaser (prospective owner)
The owner and/or general contractor and the subcontractor, material supplier or equipment lessor, Realtor, appraiser, consultant
The owner and the lender
In addition the borrower cannot be related to the listing agent, selling agent, seller or contractor

22. Fannie Mae Homestyle vs. FHA 203(k)
Primary residences, second homes, and investment properties allowed
5% down payment on primary residences
Credit-based MI premiums
Standard FNMA Seller Concessions guidelines
Primary residences only
3.5% down payment
6% Seller Concessions

23. How can this product benefit you and your borrowers?
With short sales and foreclosed properties, this loan product can help buyers purchase a home in need of repairs and be able to close and complete the repairs afterwards.
More options for your buyers to be able to purchase a house that may meet some of their needs, but requires some work.
You get paid at closing and do not have to wait.
Great way to “List” a property that needs help!

24. How can LSMG help
you and your borrowers
with Renovation Loans?