The Fannie Mae Homestyle loan can finance up to 97% of the acquisition price PLUS the cost of materials and labor for the rehab project. For instance – if you find a property you’d like to purchase at $300,000.00 but you know you’d like to add $50,000.00 of immediate modifications to the property right after you buy it, the Fannie Mae Homestyle can lend you 97% of the total $350k endeavor.
So – in this example, you can show up to purchase this home for $300k, and come to the table with 3% of purchase PLUS rehab ($50k) = $10,500.
Your mortgage on day one in this example would be $339,500.00. The seller would walk away with their 300k. And you would have a $50,000.00 rehab budget that would begin to be dispensed to your construction team.
Generally when getting a rehab loan, you not only have to be credit approved like any other loan, but you would also have to loop in a general contractor to create a construction plan and a budget. The GC has to submit their financials for review from the lender, and the building plans, budget, and schedule get approved by the lender as well as the appraiser.
If you are going to access 97% of $350k, the appraiser has to also verify that the COMPLETED version of the property would be worth that $350k value.
So you can see that the rehab lending process is quite a bit more complex than just financing an existing property.
Be sure to schedule an appointment with us to make sure you have the right plan in place!