Are you a homeowner looking to renovate or repair your property? If so, you may be interested in the ChoiceRenovation Loan program. This innovative financing option, backed by Freddie Mac, allows homebuyers and homeowners to fund renovations, repairs, and improvements through a single mortgage loan.
The ChoiceRenovation Loan program is a financing solution that combines the cost of purchasing or refinancing a home with the expenses associated with renovations, repairs, or improvements. This program is designed to help homebuyers and homeowners access the funds they need to make their desired property improvements without having to secure separate financing. It is a conventional loan, meaning it is not backed by the government, but it does offer competitive rates and flexible terms similar to other Freddie Mac mortgage products.
Simplified financing: By combining the purchase or refinance of a home with renovation costs, the ChoiceRenovation Loan program streamlines the financing process. Borrowers only need to apply for and manage a single loan, rather than juggling multiple financing options.
Competitive interest rates: ChoiceRenovation Loans often offer competitive interest rates compared to other renovation financing options, such as personal loans or credit cards.
Increased buying power: For homebuyers, the ChoiceRenovation Loan program can increase their purchasing power by allowing them to finance the cost of necessary renovations or improvements into the mortgage.
Improved home value: By investing in renovations and improvements, homeowners can potentially increase the value of their property, building equity in the long run.
Flexibility: The ChoiceRenovation Loan program allows for a wide range of improvements, from minor repairs to major renovations, giving borrowers the flexibility to tailor their projects to their specific needs and preferences.
To qualify for a ChoiceRenovation Loan, borrowers must meet certain eligibility criteria:
Credit Score: Borrowers typically need a minimum credit score of 620 to qualify for a ChoiceRenovation Loan.
Income and Employment: Borrowers must demonstrate stable income and employment history. Lenders will evaluate income, employment history, and debt-to-income (DTI) ratio to ensure borrowers can repay the loan.
Down Payment: For purchase transactions, borrowers must make a minimum down payment of 3% for primary residences. Higher down payment requirements may apply for second homes and investment properties.
| Property Type | Occupancy | Max Loan to Value (LTV) |
|---|---|---|
| 1 Unit | Primary | 97% |
| 2-4 Units | Primary | 95% |
| 1 Unit | Second Home | 90% |
| 1 Unit | Investment | 85% |
| 2-4 Units | Investment | 75% |
Loan Limits: The loan amount, including both the purchase price (or current loan balance for refinances) and renovation costs, must not exceed the conforming loan limits set by Freddie Mac. These limits vary by county and are higher in counties with higher housing costs. You can view the loan limits for each state we lend in by clicking the states below:
Renovation Costs: The total renovation costs must not exceed 75% of the "as-completed" appraised value of the property. Contractor requirements: All renovation work must be completed by licensed and insured contractors who have been approved by the lender.
Property Types: ChoiceRenovation Loans are available for a variety of property types, including single family homes, multi-family homes, townhouses, and condominiums.
The ChoiceRenovation Loan program allows for a wide range of renovations and improvements, including:
However, it's important to note that luxury improvements, such as swimming pools or outdoor kitchens, may not be eligible for financing under the ChoiceRenovation Loan program.
Applying for a Freddie Mac ChoiceRenovation Loan involves several steps:
Pre-Approval: Start by getting pre-approved for a mortgage by completing our online Loan Application. After completing the application, you will receive instructions on how to upload your documents. For a list of documents that you will need to upload, see our Pre-approval Document Checklist.
Find a Property: If you're purchasing a home, begin your search for a property that meets your needs and budget. If you're refinancing, you'll be working with your current home.
Renovation Planning: Borrowers must work with their chosen contractors to develop a detailed renovation plan, including a scope of work, timeline, and budget.
Submit Your Loan Application: Once you have a property and renovation plans, submit your loan application and documentation for loan approval.
Appraisal and Underwriting: The lender will order an appraisal to determine the current value of the property and the expected value after renovations. The loan will then go through underwriting, where the lender reviews all documentation to ensure it meets Fannie Mae's guidelines.
Loan Closing: Once the appraisal is complete and all loan conditions are met, the borrower can proceed with closing on the ChoiceRenovation Loan.
Renovation Process: After closing, the renovation work can begin. Funds for the renovations are typically disbursed in stages as work is completed and inspected.
One of the key aspects of the ChoiceRenovation Loan is the renovation timeline and fund disbursement process. The program allows for a maximum renovation period of 12 months from the date of loan closing. Here's how the process generally works:
Initial Disbursement: An initial disbursement may be made to the contractor to cover the cost of materials and permits. This amount is usually a percentage of the total renovation budget.
Progress Inspections: As the renovation work progresses, the lender may require periodic inspections to verify that the work is being completed according to the agreed-upon plans and timeline.
Subsequent Disbursements: Additional funds are released in stages based on the progress of the work. These disbursements are often tied to specific milestones, such as the completion of framing, electrical work, or plumbing.
Final Inspection and Disbursement: Once the renovations are complete, a final inspection is conducted to ensure all work has been finished as planned. The remaining funds are then released to the contractor.
Contingency Reserve: It's common to include a contingency reserve of around 10%-15% of the renovation budget to cover unexpected costs or changes to the renovation plans. This reserve provides a financial cushion in case of unforeseen expenses.
Selecting the right contractor is crucial for the success of any renovation project, and it's especially important when using a ChoiceRenovation Loan. Borrowers should take the time to research and interview potential contractors, ensuring that they are licensed, insured, and experienced in the type of work required. Lenders will also review and approve the chosen contractors, verifying their credentials and qualifications. This helps protect both the borrower and the lender by ensuring that the renovation work is completed by reputable professionals.
To determine if the ChoiceRenovation Loan is the right choice for your needs, it's helpful to compare it to other renovation financing options, such as the FHA 203(k) loan, Fannie Mae Homestyle Renovation, and home equity lines of credit (HELOCs).
The FHA 203(k) loan is a government-backed renovation loan that combines the purchase (or refinance) and renovation costs into a single mortgage. It offers lower down payment requirements (as low as 3.5%) and more lenient credit score requirements compared to the ChoiceRenovation Loan. However, it has some limitations:
The Fannie Mae HomeStyle Renovation Loan is another renovation loan option similar to the Freddie Mac ChoiceRenovation Loan. It also allows borrowers to finance the purchase (or refinance) and renovation costs with a single loan. It also allows the renovation funds to be used for a variety of projects, including structural repairs, updating kitchens or bathrooms, adding new rooms, and other home improvements.
A HELOC allows homeowners to borrow against the equity in their home to finance renovations. HELOCs typically offer lower interest rates compared to personal loans and provide flexibility in borrowing, as funds can be drawn as needed. However, a HELOC is a separate loan from the primary mortgage, which means borrowers will have two loans to manage and repay. HELOCs often have variable interest rates, which can fluctuate over time and lead to higher borrowing costs if rates rise. Also, borrowers must have sufficient equity in their home to qualify for a HELOC, which may not be possible for those with limited equity or those purchasing a new home.
The ChoiceRenovation Loan program is a valuable financing tool for homebuyers and homeowners looking to renovate or improve their properties. By combining the cost of purchasing or refinancing a home with renovation expenses, this program simplifies the financing process and offers competitive interest rates. However, it's essential for borrowers to carefully review the eligibility requirements, application process, and renovation guidelines before pursuing a ChoiceRenovation Loan. By working closely with their lender and chosen contractors, borrowers can successfully navigate the renovation process and achieve their home improvement goals.
If you're considering a ChoiceRenovation Loan, take the time to research and compare your options, and don't hesitate to consult with a financial advisor or mortgage professional for personalized guidance. With the right planning and preparation, the ChoiceRenovation Loan program can help you transform your house into the home of your dreams. Alpine Mortgage offers the HomeStyle Renovation Loan in the following locations: California, Connecticut, Florida, New Jersey, New York, Pennsylvania & Texas.
Contact us today at (800) 876-5626 to learn more about our ChoiceRenovation loan programs or click here to have one of our ChoiceRenovation loan specialists contact you.
If you would like to apply for a ChoiceRenovation loan, you can apply online now.
ChoiceRenovation loans require that the work be completed by a licensed and insured contractor.
Yes, most renovation loans have specific guidelines on what other home improvement projects can be financed. Generally, improvements must be permanent and add value to the home.
Typically, renovations must be completed within 6 to 12 months after the loan closing.
Most renovation loans include a contingency reserve that can be used in the event that the renovation goes over budget.
No, if you are looking to do build a house from ground up, see our Construction Loans.
