Freddie Mac’s New Renovation Loan
Freddie Mac’s CHOICEReno eXpress program can provide you with the cash you need badly if you’re buying or refinancing a home in need of upgrades.
This one-time closing loan finances your mortgage and home renovations with just one loan. This means only one set of documents, one closing, and one set of closing costs.
Like other single-closing home improvement loans, CHOICEReno eXpress can save people time and money when they want to finance renovations to a new or existing home.
Check your mortgage options. Start here (December 29, 2021)
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What is the CHOICEReno eXpress renovation loan?
Home renovations can update a property to your style and taste. And some projects will even increase the value of your home. But renovations can be expensive.
Freddie Mac’s CHOICEReno eXpress is designed for small-scale projects and works by combining housing finance with a home improvement loan. So rather than getting separate financing to cover your real estate projects, you can get an all-in-one single-close loan.
This streamlined home improvement loan program is an alternative to using your personal savings, a credit card, or home equity to finance real estate projects.
Keep in mind, however, that this program is not for newly built properties. And it’s limited to certain types of loans and units.
Freddie Mac’s CHOICEReno eXpress differs from construction loans in that you are allowed to advance to a contractor or home improvement store 100% of the cost of materials once you have received the funds. However, you must provide an estimate from a home improvement store or licensed contractor.
The good news, however, is that you are allowed to do home improvement projects on your own if you are a licensed contractor. But the program does not pay you for labor.
What renovations can you do with Freddie’s Mac CHOICEReno eXpress?
Freddie Mac’s new Home Improvement Loan program funds small-scale cosmetic upgrades, such as:
- Small interior and exterior renovation
- Interior and exterior painting
- New windows and doors
- Purchase of energy-efficient appliances
- Repair or replace your roof
You can get mortgage financing, as well as an additional 10% of the property’s value for improvements (or 15% in a community in need).
To illustrate, let’s say you buy a home for $ 300,000 with a 5% down payment of $ 15,000. Since you can get 10% of the property’s completion value, under this program you could receive up to $ 30,000 for home improvement projects.
Freddie Mac CHOICE Reno eXpress Loan Requirements
In addition to using the CHOICEReno eXpress loan for small-scale projects, you can only use this program with certain mortgage products.
It is available with Freddie Mac Fixed and Variable Rate Mortgages, such as Freddie Mac Home Possible Mortgages, Freddie Mac HomeOne Mortgages, Freddie Mac HFA Advantage Mortgages, and Super Compliant Mortgages.
Properties eligible for the Freddie Mac CHOICEReno eXpress loan include:
- Main residences with 1 to 4 apartments
- 1-unit secondary residences
- 1 unit investment properties
- Prefabricated houses
Keep in mind that the program’s maximum loan-to-value (LTV) ratio depends on the type of unit and program.
- 95 to 97% for properties with 1 unit *
- 105% for 1 unit properties with Affordable Seconds down payment assistance
- 85% LTV for main residences with 2 units
- 80% LTV for main residences with 3 to 4 apartments
- 90% LTV for second homes with 1 unit
- 85% LTV for investment properties with 1 unit
- 95% LTV for prefabricated houses
* Varies depending on the loan program. Qualifying LTVs are higher for first-time homebuyers using Freddie Mac HomeOne or Freddie Mac Home mortgages
Typically, owner-occupied mortgages require you to move into the property within 60 days of closing. However, this program does not require occupancy during the renovation, and you have up to 180 days to complete the renovations.
Other Freddie Mac Home Improvement Loans
While Freddie Mac’s CHOICEReno eXpress is an option for some borrowers, it is not an option for everyone.
For example, this program allows only small-scale renovations. If your home improvements do not qualify for funding from the eXpress program, they may be eligible for the Freddie’s CHOICERenovation loan, which is the parent loan program.
Similar to the Xpress renovation loan, the CHOICERénovation is a one-time mortgage that covers the costs of the renovation with the financing. You can also use this loan for a new purchase or refinancing.
The difference, however, is that this program funds large home improvement projects, including renovations and repairs needed after a natural disaster.
This parent program has the same maximum LTV as Freddie Mac CHOICEReno eXpress. And you can advance a licensed contractor or home improvement store 100% of the cost of materials. You have 365 days to complete the upgrades.
Check your mortgage options. Start here (December 29, 2021)
Alternative renovation loan programs
Freddie Mac home improvement loans aren’t the only alternative for small (or large) scale projects. Other options include:
Fannie Mae HomeStyle
Another option for financing renovations with a conventional loan purchase is Fannie Mae’s HomeStyle. Whether you are buying or refinancing, you can use funds for home improvement projects, including landscaping projects and luxury upgrades.
FHA 203 (k)
When buying or refinancing with the 203 (k) mortgage guaranteed by the FHA, you can borrow up to 110% of a property’s quoted value for renovations. However, you cannot use this loan for investment property, nor for luxury upgrades like a swimming pool or outdoor kitchen.
Refinancing of collections
Another option, if you already own your home, is to cash out some of your equity with a cash refinance. This involves borrowing more than the original loan amount and then getting the difference in cash. Refinancing with cash can be a great idea if you plan to lower your mortgage interest rate at the same time as you leverage your home equity.
Home equity loan
Or, you can apply for a home equity loan. This involves borrowing against the equity in your home and receiving a lump sum payment, typically up to 80% to 85% of the value of your home.
Unlike a cash refinance, this is a “second mortgage” meaning you take out a separate loan. above your existing mortgage. This will leave you with two loans and two monthly payments. But it may be better than refinancing if you already have a good rate on your current mortgage – or if you’re almost done paying off the house.
Home Equity Line of Credit (HELOC)
A HELOC also allows you to borrow against the available equity in your home. But rather than getting a lump sum, you’ll have access to a line of credit that you can use as needed.
Choose a renovation loan
Freddie Mac’s CHOICEReno eXpress program is just one of many options for financing home renovations. The type of loan that’s right for you will depend on your finances, your current homeownership status, and the type of renovations you want to do.
Contact a mortgage lender when you are ready to discuss your options. A loan officer can help you determine what types of loans are available, what you are eligible for, and what will be best for your situation.
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The information on The Mortgage Reports website is provided for informational purposes only and does not constitute an advertisement for any products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, its parent company or its affiliates.