Upload
living-room-realty
View
327
Download
0
Embed Size (px)
DESCRIPTION
Advantis Credit Union presented at Living Room Realty's Monthly Workshop Series: How'd You Do That ADU? on December 5, 2013. This presentation covers Rehab Mortgages that can be used to finance home improvements as well as ADU construction or conversion.
Citation preview
Financing an ADU in today’s market
Presented by Advantis Credit Union
Self Financed Options
> Pay cash from your own funds> Borrow against an IRA or 401k (if
available)Borrow from Family> Borrow from Family
> Home Equity Loan (Assuming you have the equity based on today’s value)
The Advantis Rehab Mortgage(Available for ADU’s)
> What is a rehab mortgage?> How does it work?> Benefits and limitations> Application process> How to find the best deal
What is a Rehab/ADU loan?
A rehab mortgage is a mortgage loan that combines the cost of a house and any needed repairs or remodeling.
Uses of a Rehab/ADU MortgageRehab mortgages can be used for:
> Purchasing a house that needs repairs> Purchasing a house that you intend to
remodel (Adding an ADU).remodel (Adding an ADU).> Refinancing your mortgage and borrowing
more to make major home improvements.
How Does a Rehab Mortgage Work?
> The lender approves the mortgage based on the current and estimated value of the home after improvements.
> Purchase money is advanced first.> Purchase money is advanced first.> Remainder of money is advanced in
installments as the repairs progress, less holdback.
> Inspector approves repairs.
Benefits to a Rehab Mortgage
> Property does not have to be repaired prior to closing> Lower payments than a home equity plus a mortgagea mortgage> Can advance more than the current value of the property, allowing major improvements
Limitations of a Rehab Mortgage
> Requires strong credit history > Down payment & hold-back requirements> Too expensive for small improvements> Work done by licensed contractor> Work done by licensed contractor> Only offered for owner-occupied*> Mortgage insurance required*> FHA appraisal stricter than standard
appraisal** Requirement waived at Advantis
Qualifications for a Rehab Mortgage
> Down payment requirements (no gifts)> Good established credit needed> At least 2 years on your job
Debt ratio 45% or less> Debt ratio 45% or less> 2 months savings “reserves”
Application Process
> Credit preapproval> Locate the property and perform a
feasibility analysis> Sales contract, contingent upon financing> Sales contract, contingent upon financing> Work write-up and cost estimate approved > Appraiser provides “as is” and “after
renovation” valuation> Lender issues formal commitment to lend
Comparison Shopping
> Compare loan fees> Compare loan terms – fixed or variable?> Know your lender
Questions?
Thank you for coming!Thank you for coming!