Freddie Mac has launched a new home renovation loan program that allows home buyers to also finance the cost of renovations with a single-close mortgage.
Nearly 80% of the nation’s 137 million homes are at least 20 years old and 40% are at least 50 years old, the company reports.
Many of these properties are ideal for first-time home buyers, the only problem is, many of them can’t cover the additional cost of needed renovations after the closing.
The new CHOICERenovation loan offering is designed to address this problem. It “gives borrowers the opportunity to make improvements, renovations and upgrades to a home using a purchase or no cash-out refinance loan that will be eligible for sale to Freddie Mac,” says Danny Gardner, senior vice president, single-family affordable lending and access to credit, at Freddie Mac.
“Given the increasing age of existing housing stock, the growing number of millennial and other first-time homebuyers looking for more affordable home buying options, and the increase in retirees opting to age in place, the Freddie Mac CHOICERenovation mortgage is a flexible solution to finance or refinance these fixer-uppers,” Gardner adds.
Lenders can sell CHOICERenovation loans to Freddie Mac where the loan proceeds are used to pay for the renovations. If lenders deliver the loans after the renovations are complete, they can sell these loans to Freddie Mac without recourse.
If lenders want to deliver the loans during the construction period, prior to completion of the renovations, they will be able to do so with recourse but must obtain prior approval from Freddie Mac.