Freddie Mae has announced a new single-close mortgage product This allows homeowners to finance the cost of minor renovations. With CHOICEReno eXPress, homebuyers can cosmetic renovationssuch as replacing windows and doors, roof repairs, minor renovations and interior or exterior painting.
The new product is a extension of existing Freddie Mac CHOICERenovation mortgages. The new loans offer homebuyers and homeowners cheaper loan terms than using credit cards or unsecured financing on minor renovations.
Lenders can sell the new mortgages to Freddie Mac if the loan proceeds are used to finance home renovations up to 10 percent of the completion value of the house (up to 15 percent in rural regions with a high requirement rating) without the need for separate lender approval or recourse, depending on the purchase price. A full inspection is required to ensure that the planned renovations have actually been carried out.
According to Danny Gardner, senior vice president of client and community engagement in Freddie Mac’s single-family business, the streamlined loan requirements will be beneficial for lenders looking to offer a home renovation option to their customers, but with limited experience with home renovation and construction loans feature.
The company also has updated his requirements for the CHOICERenovation mortgage product to make it easier for lenders to implement and offer to more borrowers. The changes include:
Advance 100 percent of material costs and pay renovation costs directly to a hardware store,
the ability to use the proceeds to finance previous renovations to an existing home in the short term; and
- allows a borrower not to have a primary residence during the renovation.
CHOICERenovation proceeds can also be used to renovate a property that has been damaged by a natural disaster or for renovations that will help the borrower avoid damage from a future disaster.
The CHOICERenovation updates and the new CHOICEReno eXPress will be available for mortgages with a settlement date from November 1, 2021.