The CHOICERenovation Loan From Freddie Mac

The CHOICERenovation mortgage offering from Freddie Mac is designed to provide homebuyers with a comprehensive solution for financing renovations alongside their home purchase or refinance. This article delves into the key features, benefits, and requirements of the CHOICERenovation program, making it an essential read for prospective homeowners and lenders alike.

Overview of CHOICERenovation

Freddie Mac’s CHOICERenovation program allows borrowers to finance the cost of renovations directly into their mortgage. This offering is particularly beneficial for addressing the needs of older homes and the increasing demand for affordable housing solutions. By incorporating renovation costs into the mortgage, Freddie Mac aims to enhance housing options and support the aging housing supply.

Key Features

1. Single-Close Transaction: Unlike traditional renovation loans that require separate financing for renovations, CHOICERenovation allows for a single-close transaction. This means that borrowers can secure their mortgage and renovation financing in one go, simplifying the process.
2. Streamlined Options: The introduction of CHOICEReno eXPress provides a streamlined option for smaller-scale renovations, making it easier for borrowers to access funds without extensive paperwork.
3. Flexibility in Mortgage Types: CHOICERenovation is compatible with various mortgage products, including fixed-rate and adjustable-rate mortgages. This flexibility allows lenders to cater to a wider range of borrower needs.

Who Can Participate?

Lenders interested in offering CHOICERenovation loans must meet specific eligibility criteria:

• Experience: Lenders must demonstrate at least two years of experience in originating and servicing renovation loans. Exceptions may be made for newer lenders under certain conditions.
• Approval Process: Lenders must be eligible to sell loans with recourse to Freddie Mac. They can obtain further information by contacting their Freddie Mac account executive or calling customer support.

Renovation Costs

Borrowers can finance up to 75% of the “as-completed” appraised value for renovations. This includes costs associated with adding or renovating accessory dwelling units (ADUs), which are increasingly popular among homeowners looking to maximize their property’s potential.

Loan-to-Value Ratios

The program offers competitive loan-to-value (LTV) ratios:

• 1-unit Primary Residence: Up to 95% (higher for first-time homebuyers).
• 2-unit Primary Residence: Up to 85%.
• 3-4 unit Primary Residences: Up to 80%.
• Manufactured Homes: Up to 95%.
• Mortgages with LTV ratios greater than 80% require mortgage insurance coverage.

Appraisal Requirements

Properties rated with a C5 or C6 condition can qualify for CHOICERenovation loans if all issues are resolved as part of the renovation process. The appraisal must reflect these improvements.

Concurrent Transfers of Servicing

Freddie Mac permits concurrent transfers of servicing involving CHOICERenovation mortgages, provided prior written approval is obtained. This flexibility allows lenders to manage their servicing responsibilities effectively while ensuring compliance with Freddie Mac guidelines.

The CHOICERenovation mortgage offering from Freddie Mac presents an innovative solution for homebuyers looking to finance renovations as part of their mortgage. With its flexible structure, streamlined processes, and focus on enhancing housing options, this program addresses critical needs in today’s housing market. Lenders and borrowers alike should consider how CHOICERenovation can facilitate homeownership while supporting necessary renovations in older homes.