Freddie Mac's Choice Renovation Loan

Product Overview Picture the Possibilities with a Renovation Loan

With a renovation loan, you can remodel the house you’re already in or transform a fixer-upper you’ve been eyeing. Our process is simple: you can roll the costs of repairs or upgrades into your mortgage, giving you one loan with one payment.

With Freddie Mac CHOICERenovation MortgagesSM*, you can count on:

• Financing for up to 75% of a home's projected value once completed
• Affordable down payment options as low as 3% for primary residence
• Primary 1 unit – 97% LTV, 2 unit – 85% LTV, 3-4 units – 80% LTV
• Options for primary, secondary and investment properties up to 6 financed properties
• Only allowed on single family residences for second and investment properties
  • Second home – 90% LTV and Investment – 85% LTV
• NO MOBILE/MANUFACTURED HOMES
• BOND/DPA NOT ALLOWED EXCEPT COMMUNITY SECOND DPA UP TO 100% CLTV.
• Funds can be used for repairs or renovations that are permanently affixed to the property
• Support and communication through each step of the process

PrimeLending has been relentlessly simplifying the loan process for more than 30 years. Let us help you bring out your home’s inner beauty.

Let’s get started on making your home renovations possible!

Allowable Repairs or Renovations

Funds can be used for any repairs/renovations that are permanently affixed to the property (either dwelling or land.)

• There is no minimum dollar amount for renovations.
• Allowable repairs or renovations include, but are not limited to:

• All cosmetic repairs
• Updating or replacing systems such as Electrical, Plumbing or HVAC
• Installation of an “in-ground” swimming pool, including outdoor living areas
• Completion of final work on a newly built home when the home is at least 90% complete. Remaining improvements must be related to non-structural items the original builder was unable to finish, such as installation of buyer-selected items like flooring, cabinets, kitchen appliances, fixtures and trim.
• Appliances may be included as part of an overall remodeling project that includes substantial changes or upgrades to the room in which the appliances are placed. Washers and dryers are not included.
• Adding additional square footage
• Construction of various outdoor buildings and structures such as accessory units, attached or detached garages, recreation rooms, provided the unit is in compliance with local zoning requirements.

Renovation Cost Limits

• The cost of renovations is limited to 75% of the “as-completed value” of the property or Sales Price + Reno Total, whichever is lower.
  • No exceptions. This is a Fannie/Freddie 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 MAY REQUIRE a Structural Engineers Report.
  • Structural Engineers Report will be REQUIRED when:
    • Adding a new addition on top of existing house (building UP)
• Contractor's bid notes that structural report is needed
  • Removing a load bearing wall
  • Major foundation/Basement repairs
  • Underwriter/Appraiser requires it
• Structural Engineers Report is NO LONGER required when:
  • Adding a new addition off the side or back of dwelling, unless a load bearing wall is impacted
  • Building a new garage or outbuilding, whether attached or detached to the dwelling
  • Minor foundation/Basement repairs (such as filling cracks, finishing basements, adding support)

Contingency Reserve

• A contingency reserve equal to 10% 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.

Fees for Renovation loan

• Single Fee: $900

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 the Extension 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.