Lester Freeman
Freddie Mac offers a range of mortgage solutions, including construction loans. The Freddie Mac CHOICERenovation loan is a popular option for those looking to finance both the purchase of a home and the cost of renovations. This loan simplifies the process by combining both expenses into a single loan, which can save on closing costs. The loan also does not require borrowers to hire a construction consultant. Additionally, Freddie Mac offers Construction Conversion Mortgages, which provide flexible financing options for those looking to combine construction conversion mortgages with other mortgage products, such as low down payment mortgages. The FHLMC One-Time Close Construction loan is another option that allows borrowers to secure financing for the purchase of land, construction, and the permanent mortgage in a single closing.
| Characteristics | Values |
|---|---|
| Loan Type | FHLMC One-Time Close (OTC) Construction loan |
| Purpose | Combine financing for a lot purchase, construction and permanent mortgage into one first mortgage loan |
| Ideal For | Borrowers purchasing new construction |
| Disbursement Limit | $250,000 at closing for land acquisition or payoff |
| Permit Requirements | Approved Building Permit, Perc Test and Timeline Confirmation |
| Total Timeline | Not exceeding 10 months |
| Max LTV | 95% for Modular and Manufactured Homes |
| Re-qualification | None, but re-verification of employment is required |
| Freddie Mac Product | CHOICERenovation loan |
| Credit Score | No minimum, but rankings determined by the lender |
| Down Payment | Minimum of 3% when combined with a Home Possible loan, otherwise 5% |
| Debt-to-Income Ratio | Determined by the individual lender |
| Renovation Costs | Up to 75% of the appraised value of the home after improvements |
| Renovation Timeline | Six months |
| Home Inspection | Required by Freddie Mac to confirm completion |
What You'll Learn
FHLMC One-Time Close Construction loans
The FHLMC One-Time Close (OTC) Construction loan is a product that allows borrowers to secure financing for a lot purchase, construction, and permanent mortgage in a single loan with one single closing date. This simplifies the financing process for new home buyers by eliminating the need to obtain both a construction loan and a permanent mortgage.
With the FHLMC OTC loan, borrowers can secure financing for the purchase of the land, the construction, and the home's permanent mortgage in a single closing. This means only one set of closing costs, helping save money. It also allows the process to move forward without interruption from potential financing snags later on. The maximum loan-to-value (LTV) ratio is 95% for Modular and Manufactured Homes, and 97% for CHOICEHome combined with Home Possible or HomeOne.
FHLMC OTC Program overlays and eligibility include a maximum of $250,000 disbursement at closing for land acquisition or payoff. Permit requirements prior to closing include an approved building permit issued by the local building authority for the proposed plan, or a Perc Test and Timeline Confirmation supporting the appropriate bedroom count for the project, along with a letter from the local building department confirming that the permit will be issued within 90 days. The total construction timeline must not exceed 10 months.
Freddie Mac also offers Construction Conversion Mortgages, which provide a variety of competitive sale execution options for loans processed as purchase transactions. Lenders can sell loans processed as no-cash out and cash-out refinances (site-built only).
How Foreclosure and Loan Modification Are Related
You may want to see also
Construction Conversion Mortgages
The Freddie Mac Construction Conversion Mortgage is designed for borrowers who are purchasing new construction and offers flexibility in securing permanent financing. It provides a range of competitive sale execution options for loans processed as purchase transactions. Lenders can sell loans processed as no-cash out and cash-out refinances for site-built properties.
To be eligible for a Construction Conversion Mortgage, borrowers must meet the risk class and/or minimum Indicator Score requirements specified in the relevant guides and documentation. Additionally, the settlement date for the permanent financing must not exceed 12 months from the effective date, as outlined in the MultiLender Swap guidelines.
How Forbearance Impacts Your Loan: What You Need to Know
You may want to see also
CHOICERenovation loans
Freddie Mac's CHOICERenovation loan is a unique financial product that helps borrowers navigate the complex world of home renovations and purchases. Unlike traditional loans, the CHOICERenovation loan combines the costs of buying a home and making necessary improvements into a single mortgage, eliminating the need for two separate loans and closings. This innovative approach simplifies the process, making it easier for borrowers to manage their finances.
One of the key features of the CHOICERenovation loan is its flexibility. It allows borrowers to finance renovations that cost up to 75% of the home's value after improvements. This means that borrowers can factor in renovation costs when applying for their loan, taking into account the true value of the property after the improvements. The loan also offers competitive interest rates, which are often lower than other types of loans due to being guaranteed through Freddie Mac.
The CHOICERenovation loan can be used to purchase a new home or fund renovation projects on an existing one. It can be combined with Freddie Mac's Home Possible or HomeOne programs, allowing borrowers to purchase a home with just a 3% down payment. Primary homes, second homes, and investment properties are all eligible. Additionally, the loan can be used to provide resilience upgrades to protect homes from natural disasters and build accessory dwelling units, such as mother-in-law apartments.
The CHOICERenovation loan also offers benefits for lenders. Lenders can sell their loans to Freddie Mac prior to the completion of renovation projects, providing increased liquidity. This allows them to meet the need for affordable housing and address the aging housing supply. By delivering loans prior to completion, lenders must obtain prior written approval from Freddie Mac and deliver the mortgages with recourse that will remain in place during the renovation period.
Foreclosure Impact: CIBIL Scores and Loan Considerations
You may want to see also
Renovation Mortgages
Freddie Mac's renovation mortgages, such as the CHOICERenovation loan, allow borrowers to finance both the purchase of a home and the cost of renovations in a single loan. This can simplify the process and potentially save on closing costs.
The CHOICERenovation loan is ideal for those looking to buy a fixer-upper or run-down home that would not meet traditional financing requirements. With this loan, you can consider less expensive homes that often come with less competition and make the necessary repairs and improvements. Freddie Mac does not require borrowers to hire a construction consultant when using this loan, which can save on costs.
The CHOICERenovation loan offers flexibility in terms of credit scores, with no minimum credit score requirement. Instead, credit rankings are determined by the lender. The minimum down payment is 3.5% for FHA 203 (k) rehab financing, while Freddie Mac requires a 3% minimum down payment when combined with a Home Possible loan and a 5% minimum otherwise. The maximum allowable renovation costs on a refinance are up to 75% of the appraised value of the home after improvements and repairs. For a home purchase, renovation costs cannot exceed 75% of the lesser of the sum of the purchase price, renovation costs, or the home's value after renovation.
Freddie Mac: Understanding Their Loan Buying Strategy
You may want to see also
Freddie Mac Single-Family
One of the key offerings of Freddie Mac Single-Family is the Construction Conversion Mortgage, which allows borrowers to combine financing for land purchase, construction, and permanent mortgages into a single loan. This simplifies the financing process for new home buyers by eliminating the need for separate construction and permanent loans. The Single-Family division also offers expanded options to drive more loan volume and enhanced marketing opportunities to meet the needs of borrowers.
The Single-Family division of Freddie Mac plays a crucial role in keeping mortgage capital flowing by purchasing mortgage loans from lenders. This enables lenders to provide financing options to qualified borrowers, supporting America's homeowners and renters. Over five decades, Freddie Mac has provided more than $11.6 trillion to make homeownership possible for more than 80 million owners and renters.
Cosigner's Risk: Forbearance Loans and Their Impact
You may want to see also
Frequently asked questions
The Freddie Mac CHOICERenovation loan allows you to finance both the purchase of a home and the cost of renovations in a single loan, which can simplify the process and potentially save on closing costs.
The loan simplifies the financing process for new home buyers, eliminating the need to obtain both a construction loan and a permanent mortgage. It also does not require borrowers to hire a construction consultant.
The minimum down payment is 3% when combined with a Home Possible loan, otherwise, it is 5%. Renovations must be completed within a six-month period, and a home inspection will be required to confirm the completion of the work.
The FHLMC One-Time Close Construction loan allows borrowers to combine financing for a lot purchase, construction, and permanent mortgage into one first mortgage loan. It is designed for borrowers purchasing new construction.
