The Loan Tree is New Jersey's leading provider of Fannie Mae HomeStyle AND Freddie Mac CHOICERenovation mortgages for the past 30 years.  These programs enable borrowers to purchase a home that needs repairs, remodeling or renovation. The programs also allows for the refinance of an existing mortgage while providing additional funds for renovating the property with one low fixed rate mortgage.

One of the many benefits of the HomeStyle or Choicer program include being able to use the "after improved" appraised value to calculate your available mortgage amount.  The "after improved" value provides a higher valuation because it assumes that the renovation work has already been completed. Unlike traditional Conventional and FHA mortgages which limit your mortgage amount ONLY on the "current value" of your home, the HomeStyle and Choicer provide up to 95% of the "after improved" value which means that more renovation dreams will become a reality.

It can be exhausting finding a suitable home to buy that offers all of the comforts and features that you're looking for. Disrepair, limited living space, energy inefficiency and outdated kitchens and bathrooms can rule out purchasing a home even if it's in a great location. As housing stocks dwindle in NJ, consumers may also wish to consider a HomeStyle or Choicer Renovation refinance mortgage which can pay off your exiting mortgage AND include the cost of necessary upgrades and improvements. A single mortgage can add up to lower closing costs and lower rates. Previously, consumers had to turn to second mortgages and home equity loans to pay for energy upgrades or renovation projects after they had already purchased the home with a first loan.

If the renovation costs for the home purchase or refinance exceeds the HomeStyle or Choicer $25,000 threshold, then the participation of a HUD-licensed Consultant will be required.  Should the renovation cost not exceed the $25,000 threshold, then a Consultant is not necessary.  Moreover, funds for up to 5 draws for the improvements won’t be released to the homeowners/contractor until that portion of the work is certified to be completed by the Consultant.  These draw checks are endorsed to the homeowner & Contractor where the homeowner must sign the check in order for the contractor to deposit.

Eligible properties include:

  • Principal residences, one to four units
  • Single-unit second homes
  • Condos and Townhomes
  • Single-unit investment properties

Manufactured or mobile homes are not eligible.
Types of renovations mortgages include:

  • 15- and 30-year fixed-rate mortgages

Note from Fannie Mae: “The original principal amount of the mortgage may not exceed Fannie Mae’s maximum allowable mortgage amount for a conventional first mortgage.”

Qualifying and down payment requirements:

For an owner occupied and second home purchase, the minimum down payment requirement is 5% whereas the minimum down payment is 15% for a one-unit investment property purchase. The minimum down payment requirement pertains to the sum of the purchase price, the renovation costs and the required 10% or 15% renovation reserve requirement.

With all that there is to know, why not call The Loan Tree for assistance in navigating the application and approval process.

Getting the upgrades done on time:

When it comes to renovations, the HomeStyle and Choicer mortgage allow for a generous range of costs for inclusion in the mortgage including:

  • Architects/Blue Prints (if needed or required)
  • HUD Consultant fee(s)
  • Funds Needed For The Renovation
  • Your City/Town permit fee(s)
  • Renovation Project Reserves (10% or 15% as determined by the Consultant)

All renovations performed under either of these programs must be done by the General Contractor that you select who will need to be properly licensed and insured.

Once the loan closes, the work must begin within 30 days and must be completed within 6 months. A Consultant will inspect all work and submit a completion certificate for that phase of the work before funds can be paid to your General Contractor for that completed phase of the work. Any unused renovation reserves left over after the renovations are completed can be used for additional work or be paid as a principal reduction of the mortgage.

What to do while the work is underway:

If the Consultant determines that the property is uninhabitable during the renovation phase, up to 6 months mortgage payments may also be financed into the new mortgage.

What’s the Difference Between the HomeStyle or Choicer and an FHA 203k Loan?

The HomeStyle or Choicer and FHA 203k mortgages both offer the ability to finance improvements in concert with a purchase or refinance of your home. The HomeStyle and Choicer require a minimum down payment of 5%, while FHA 203k only requires 3.5%. While the FHA 203K allows for mortgage amounts up to 110% of the "after improved" value of your home, the Homestyle or Choicer is capped at only 95%.  The HomeStyle and Choicer also typically require a higher qualifying credit score and feature lower closing costs than those commonly charged on FHA 203k loans.

What makes the HomeStyle and Choicer program so unique is that they allow for the financing of 1-4 unit primary residences, second homes as well as 1 unit investment properties. As with all of our renovation mortgage products, the borrower must use licensed and insured professionals to do the renovation work.

Why not call or email us for additional information at 732-988-5000 202 or akelly@theloantree.com.  Or you can click here MORE INFORMATION and we will respond to your request as soon as possible.