HomeStyle Financing Overview

[Jerry Padilla]

Product Overview

• Combines home purchase or refinance (limited cash out) with home improvement financing in one loan with one closing
• Provides a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 50% of the "as-completed" appraised value of the property with a first mortgage, rather than a second mortgage, HELOC, or other more costly financing method.
• Funds can be used for repairs or renovations that are permanently affixed and add value to the property.
• Primary residences as well as second homes and investment properties are eligible.
• Maximum of 4 financed properties including subject property, on second homes and investment properties. No limit on primary residences.
• NO MOBILE/MANUFACTURED HOMES

BOND/DPA NOT ALLOWED EXCEPT COMMUNITY SECOND DPA UP TO 100% CLTV.

Required LTV's:

Primary Homes:

-1-4 Units

-620 FICO Minimum (660 High Balance)

-95% LTV 1 Unit

-85% LTV 2 Unit

-75% LTV 3-4 Unit

- Minimum 680 Credit score

Second Homes

-1 Unit - 90% LTV

-700 FICO Minimum

Investment Properties:

-1 Unit - 85% LTV Purchase Only (75% LTV Limited Cash Out)

- 720 FICO Minimum

-2-4 Unit Investment Properties - NOT ALLOWED WITH THIS PRODUCT!

Allowable Repairs or Renovations

• Funds can be used for any repairs or renovations that are permanently affixed and add value to the property.
• Allowable repairs or renovations include, but are not limited to:
  • Installation of an “in-ground” swimming pool
    • Outdoor living areas are also eligible along with the pool installation
  • Subject property cannot be an unfinished model home or unfinished new construction.
  • Kitchen appliances (i.e. cooktop/ovens/stove/refrigerator/dishwasher) may be included only as built-in fixtures (attached to property - cannot be removed) in connection with a total kitchen renovation that includes new cabinetry and countertops. Eligibility will be determined by the Renovation Department on a case-by-case basis. Washers and dryers are not included - no exceptions.

-Properties requiring foundation or structural repairs require a foundation or structural report from a licensed engineer. Some examples include but are not limited to additional square footage being added, garage additions with new foundations, cracks or settlement.

Renovation Cost Limits

• The cost of renovations is limited to 50% of the “as-completed value” of the property*.
  • No exceptions. This is a Fannie Mae requirement. These limits include the 10% contingency reserve IF FINANCED and all fees/costs listed below in the Fees section. Note: If the cost of renovations exceeds the maximum, the Borrower is NOT allowed to pay the difference at closing from their own funds. However, Contingency funds CAN be paid out of pocket. Any borrower funded contingency that is not used to complete the project will be refunded back to the borrower.
• Projects that include Structural Repairs or Adding Square Footage MUST have a Structural Engineers Report.
  • [Sample Structural Engineer's Report]
  • **NOTE: PrimeLending Underwriting reserves the right to request Feasibility Study based on full review of loan.
  • If an Engineer's Report is not economical in your area, a Feasibility Study can be ordered from Trinity Real Estate Solutions:

Contingency Reserve

• A contingency reserve equal to 10% (or may be higher depending on scope of work) of the total costs of the repairs and renovation work must be established and funded for all mortgages to cover required unforeseen repairs or deficiencies that are discovered during the renovation.
  • 20% contingency reserve required when property needs structural repairs, or where utilities are turned off.

Fees for Renovation loan

• Single Fee: $900

Feasibility Study (can be ordered in lieu of Structural Engineer report where no engineers are available): $400 for repairs under 125k / $500 for repairs between 125k-249k / $600 for repairs over 250k. Use Trinity Real Estate Solutions as the Service Provider:

Contractor Validation

• Contractor is selected by the borrower and approved by the lender
• Contractor validation will be completed by the Renovation Department.
• Maximum of three (3) contractors
• General Contractor is preferred but not required
• Follow state and local requirements for licensing of contractor(s). If a general contractor is not licensed for work that requires a license (i.e. plumbing, electrical, HVAC, etc.) obtain:
  • proof of the general contractor's liability insurance coverage of at least 2 times the total bid, OR
  • the license of the sub-contractor completing the work.
• “Do-It-Yourself” Projects are NOT acceptable even if the Borrower is a licensed contractor.
• Contractor on the project CANNOT be one of the following. (NO EXCEPTIONS):
  • Borrower
  • Borrower's employer
  • Members of Borrower's family
  • Seller
  • Realtor involved in transaction

-Loan Officer involved in transaction

Draw Information and Process

A maximum of 4 draws are allowed on this program. An initial 10% draw, 2 progress draws which will be based off of progress, and a final draw after receiving a clear final inspection and a title update. The renovation work is to be completed by the registered contractor only. Please note, no other work can be completed while the scope of work is being done. Material Draws: We allowed material draws for specialty items only such as flooring, cabinets, countertops, and windows. Only 50% of the vendor's invoice will be paid directly after receiving copies of their W-9, invoice, and a change order signed by both the borrower and the contractor. If permits are required, the contractor or the borrower is to send copies to the Disbursement Analyst after the loan funds. Complete draw documents are required to be submitted prior to ordering progress/final inspections. **Additional Final Documents are needed for properties located in the state of Texas. The original Texas Documents must be sent via mail, as the original signed copies are sent to be recorded. This is the state's requirement. Please reach out to the assigned Disbursement Analyst for the draw documents. All progress inspections, final inspections/1036 form, and title updates are ordered through our 3rd party vendor, Trinity Inspections. Change Orders must be signed by both the borrower and the contractor and sent to the assigned Disbursement Analyst prior to any work starting and for any changes made to the scope of work. The Disbursement Analyst will review and approve the change order. **Please note, the Disbursement Analyst will send the change order to the appraiser for approval, if repairs that could negatively affect the value are requested to be removed. Wire instructions are required to process disbursements. Funds will be wired within 48 business hours to the contractor's account, once the progress/final (100%) inspections are received. Additional Draw is allowed at a charged of $110 per progress draw. This fee will be charged to the borrower for any draws over the number allowed, per the product. The contractor is welcome to pay the fee, if he/she commands. It will be deducted from the contractor's disbursement. **Also, the contractor's final disbursement will be deducted, if the borrower does not have sufficient funds in his/her contingency reserve to cover the additional inspection and/or title up-date fees that he/she has incurred during the renovation process. The borrower will be responsible for paying the difference (that was deducted) to the contractor directly. If the renovation is not completed by the completion date, the borrower and the contractor will need to submit theExtension Request Form. The reason for the delay, their next steps, and an estimated new completion date will need to be stated on the form. **The borrower and the contractor will need to include an additional week to their new estimated completion date to allow time for the final inspection report to be delivered. This form will need to be signed by both parties and sent to the assigned Disbursement Analyst prior the original completion date. If the project is past the completion date and late fees have incurred, the fees are either to be deducted from the contingency reserve, if there are sufficient funds to cover, the contractor's final payment, if the contractor accepts responsibility, or the borrower can send a check. Any unused funds will be refunded to the contributing party or applied as a principal reduction, per the Escrow Holdback Approval form. Contractor Termination: The borrower will need to send an email or a letter to the contractor and copy the assigned Disbursement Analyst and the Loan Officer stating he/she has been terminated, the reason for the termination, and the date their contract was terminated. The Disbursement Analyst will send the borrower the required documents to register a new contractor. The complete documents are to be sent to the Disbursement Analyst for review. After review, the Disbursement Analyst will alert the borrower that the new contractor may proceed with the completion of the renovation work. **Please note, the borrower is responsible with providing the Disbursement Analyst direction on how much, if any, would be paid to the terminated contractor. Final draw documents would be required to pay the final amount.Permits

Copies of permits must be provided to PrimeLending before any subsequent draws will be disbursed, after initial settlement. Work not requiring a permit may begin after loan funding.