Homestyle Renovation Fannie Mae Jumbo loans?!

9 Replies

Hello BP!

Has anyone ever done a jumbo loan (80/10/10) concurrently with a Fannie Mae Homestyle Renovation loan? Is this even possible? 

I am a first time home buyer saving up for a down payment and thought this would be a great way to acquire my first home. The way I want to execute would be FannieMae Homestyle Renovation loan for the 80% then second mortgage for 10% and put down 10%. Looking around 350k home prices in southern California. I'm trying to utilize a second mortgage and benefit from writing off the interest from the second mortgage as oppose to paying the PMI with no tax deduction and at the same time finding a good deal to renovate, live in, then later buy and hold, or sell with appreciation. Rinse and repeat.

Is this even possible? Anyone with homestyle Renovation, 203k 203(k) , Fannie mae knowledge please help me!

Thanks in advanced BP. 

-Jason

@Jason Ines I think you're overthinking it. Since it's going to be your primary residence, it may make most sense to do a 90% Fannie Mae Homestyle, then when renovation is complete, refi into an 80% LTV loan assuming you've created enough equity to do that. Yes, you'll have PMI this way but if it goes well, its only for a few months until the work is completed.

A 203k can get you in with only 3.5% down but your offer becomes less competitive and with less equity invested upfront, less likely you can "earn" your way out of PMI.

More detailed information would be helpful to truly give you the best advice.  Feel free to PM me direct or use my profile info to contact me directly.  I'm happy to chat and explain these loan types and how a renovation loan works.  I grew up in San Diego so although I'm in NorCal now, I'm very familiar with SoCal...or I can refer you to someone closer to you.  

Glad to see you are doing your research!  I'm always amazed at how many people in the biz don't know about Homestyle!  

@Jason Ines The loan amount you are talking about is not a Jumbo. I think the term you are looking for is a piggyback loan (80/10/10). If you are looking to buy the property as owner occupy (as you have stated), then you have access to all the different financing options. You can do a piggyback or straight 90%, including others.

Hi @Jason Ines

You've got some good advice here.  @Carrianne Mucho sounds like someone who can help you with your financing strategy.  The structure of the financing programs are the same regardless of the location of the lender, so I encourage you to work, directly with someone like Carrianne, who is knowledgeable about 203k's.

Before you get caught up in the common perception that "PMI is bad", be sure to look at all factors. Typically the second loan, for the 10% of the purchase price, is a higher interest rate loan and has additional transactions costs to execute the loan. Include those costs into your overall comparison of a 80/10/10 structure vs. paying PMI. in the long run, minimizing your cash out of pocket can create a much larger cash on cash long term return.

Originally posted by @Luke Schrotberger :

Hi @Jason Ines

You've got some good advice here.  @Carrianne Mucho sounds like someone who can help you with your financing strategy.  The structure of the financing programs are the same regardless of the location of the lender, so I encourage you to work, directly with someone like Carrianne, who is knowledgeable about 203k's.

Before you get caught up in the common perception that "PMI is bad", be sure to look at all factors. Typically the second loan, for the 10% of the purchase price, is a higher interest rate loan and has additional transactions costs to execute the loan. Include those costs into your overall comparison of a 80/10/10 structure vs. paying PMI. in the long run, minimizing your cash out of pocket can create a much larger cash on cash long term return.

Thanks for the comments Luke! I have the same thoughts about PMI. So many people don't know that with conventional financing, PMI declines as more equity is gained and eventually is removed when the appropriate LTV is achieved. Jason, if you plan to hold long term, a second will have more risk in an environment of increasing interest rates (since seconds are an ARM product, not fixed). With a larger first, you are locking in the current low rates for 30 years and have the comfort of knowing that expense will not change.

@Carrianne Mucho  Thank you for your knowledge! I'm definitely looking forward to doing a low down renovation loan now. Although it won't be several months before i actually pull the trigger on this, all this information will put me on the right path to finding the best solution to enter the game minimizing all my risk as much as I can before then. @Luke Schrotberger Thanks for the input! 

You both work with these types of loans I'm guessing g since you are lenders, which renovation loan do you think is better? 203k or homestyle Renovation?

Thanks again! 

Jason

Originally posted by @Jason Ines :

@Carrianne Mucho  Thank you for your knowledge! I'm definitely looking forward to doing a low down renovation loan now. Although it won't be several months before i actually pull the trigger on this, all this information will put me on the right path to finding the best solution to enter the game minimizing all my risk as much as I can before then. @Luke Schrotberger Thanks for the input! 

You both work with these types of loans I'm guessing g since you are lenders, which renovation loan do you think is better? 203k or homestyle Renovation?

Thanks again! 

Jason

Check your inbox - I just replied to your message a few minutes ago.  Both are similarly structured and it really depends on your needs (and qualifications).  203K has a lower down payment requirement at just 3.5% but has higher fees and more paperwork.  Homestyle requires 5% minimum down with a bit less hassle.  Your lender of choice, if they know what they are doing, should be able to help you figure out which one is best for you and your situations.

Originally posted by @Carrianne Mucho :

Check your inbox - I just replied to your message a few minutes ago.  Both are similarly structured and it really depends on your needs (and qualifications).  203K has a lower down payment requirement at just 3.5% but has higher fees and more paperwork.  Homestyle requires 5% minimum down with a bit less hassle.  Your lender of choice, if they know what they are doing, should be able to help you figure out which one is best for you and your situations.

Carrianne, in your experience, how long do HS loans tend to take to close? I keep reading at least 60days, is that true? Thanks.

@Victor S. - Great question as I've seen a lot of different answers from people.  I can't speak for other companies but for mine, the processing/underwriting itself doesn't take more than the standard 30 days.  The delays come about waiting for contractor bids and indecisiveness or design changes by the borrower.  So, if you know what your doing, and your lender knows what they're doing, and you have a contractor that you work closely with who will turn the bid around quickly for you, then a 30 day close is achievable.   

Originally posted by @Carrianne Mucho :

@Victor S. - Great question as I've seen a lot of different answers from people.  I can't speak for other companies but for mine, the processing/underwriting itself doesn't take more than the standard 30 days.  The delays come about waiting for contractor bids and indecisiveness or design changes by the borrower.  So, if you know what your doing, and your lender knows what they're doing, and you have a contractor that you work closely with who will turn the bid around quickly for you, then a 30 day close is achievable.   

 Nice. Thanks again, Carrianne!

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