HomeStyle – Allowable Transactions
Allowable HomeStyle transactions:
- Purchase.
- Rate and Term Refinance.
- Cash-Out Refinance.
Home Style Purchases
Purchase Money transactions are allowed subject to certain LTV requirements.
HomeStyle Rate and Term Refinance
“Home improvement rate and term” refinances are allowed and defined as a transaction in which the borrower may obtain a new mortgage to cover:
- The unpaid principal balance on the existing first mortgage (see requirements below for home equity line of credit).
- Odd days interest on the existing mortgage.
- Closing costs on the new mortgage.
- Prepaids (for example, interest, taxes, or insurance).
- Points.
- The amount of any subordinate mortgage lien(s) that was used in its entirety to acquire the subject property (regardless of seasoning).
- The amount of a home equity line of credit in first or subordinate lien position that was used in its entirety to acquire the subject property (regardless of seasoning).
HomeStyle Cash-out Refinance
A cash-out refinance transaction is defined as:
- A loan that replaces existing financing on a property, where the borrower’s intent is to extract equity from the subject property; or
- A loan on property that the borrower currently owns free and clear and will receive cash back in addition to total renovation costs; or
- Payoff of subordinate liens not used to acquire the subject property.
Note: Cash-out Refinance Renovation transactions are not allowed for properties located in the state of Texas.
The mortgage amount for a cash-out refinance transaction may include:
- The unpaid principal balance on the existing first mortgage.
- Odd days interest on the existing first mortgage.
- Closing costs on the new mortgage.
- Prepaids (for example, interest, taxes, or insurance).
- Points.
- The amount of any subordinate mortgage liens that are being paid off or paid down, regardless of the age of the lien.
The borrower must disclose the purpose of the cash out. Cash-out funds may be disbursed at closing or at final escrow disbursement on a Fannie Mae HomeStyle.
Cash-out at final escrow disbursement
When all cash-out funds are disbursed at final escrow disbursement, themaximum LTV/TLTV/CLTV calculation is based on the matrices for theproperty type and product type.
Cash-out at closing
Cash-out may be disbursed to the borrower at the time of closing provided the maximum loan amount and the maximum cash out to be disbursed to the borrower is determined by the date the borrower obtained title to the property.
Calculating Your HomeStyle Cash-out Refinance Loan Amount
Property owned a minimum of one year:
1. The maximum loan amount for a HomeStyle mortgage is determined by multiplying the maximum LTV/TLTV/CLTV for the occupancy and property type by the “as completed” appraised value.
2. Cash-out to the borrower is the loan amount minus the existing mortgage debts minus the total costs of renovation minus refinancing costs.
Property owned less than one year:
1. The maximum loan amount is the lesser of:
a. The maximum cash-out LTV/TLTV/CLTV for the occupancy and property type multiplied by the “as completed” appraised value or
b. The sum of the following:
- The maximum cash-out LTV/TLTV/CLTV for the occupancy and property type multiplied by the acquisition costs (original purchase price plus closing costs on the purchase financing), plus
- The total cost of the HomeStyle renovation, plus
- Refinancing costs.
2. Cash out is the loan amount determined under a and b above, whichever is less, minus existing mortgage debt minus total costs of renovation minus refinancing costs.
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