Advantis Credit Union presented at Living Room Realty's Monthly Workshop Series: How'd You Do That ADU? on December 5, 2013. This presentation covers Rehab Mortgages that can be used to finance home improvements as well as ADU construction or conversion.

1. Financing an ADU in today’s
market
Presented by
Advantis Credit Union

2. Self Financed Options
> Pay cash from your own funds
> Borrow against an IRA or 401k (if
available)
> Borrow from Family
> Home Equity Loan (Assuming you have
the equity based on today’s value)

3. The Advantis Rehab Mortgage
(Available for ADU’s)
> What is a rehab mortgage?
> How does it work?
> Benefits and limitations
> Application process
> How to find the best deal

4. What is a Rehab/ADU loan?
A rehab mortgage is a mortgage loan that
combines the cost of a house and any
needed repairs or remodeling.

5. Uses of a Rehab/ADU Mortgage
Rehab mortgages can be used for:
> Purchasing a house that needs repairs
> Purchasing a house that you intend to
remodel (Adding an ADU).
> Refinancing your mortgage and borrowing
more to make major home improvements.

6. How Does a Rehab Mortgage Work?
> The lender approves the mortgage based
on the current and estimated value of the
home after improvements.
> Purchase money is advanced first.
> Remainder of money is advanced in
installments as the repairs progress, less
holdback.
> Inspector approves repairs.

7. Benefits to a Rehab Mortgage
Property does not have to be repaired
prior to closing
> Lower payments than a home equity plus
a mortgage
> Can advance more than the current value
of the property, allowing major
improvements
>

8. Limitations of a Rehab Mortgage
>
>
>
>
>
>
>
Requires strong credit history
Down payment & hold-back requirements
Too expensive for small improvements
Work done by licensed contractor
Only offered for owner-occupied*
Mortgage insurance required*
FHA appraisal stricter than standard
appraisal*
* Requirement waived at Advantis

9. Qualifications for a Rehab Mortgage
> Down payment requirements (no gifts)
> Good established credit needed
> At least 2 years on your job
> Debt ratio 45% or less
> 2 months savings “reserves”

10. Application Process
> Credit preapproval
> Locate the property and perform a
>
>
>
>
feasibility analysis
Sales contract, contingent upon financing
Work write-up and cost estimate approved
Appraiser provides “as is” and “after
renovation” valuation
Lender issues formal commitment to lend

11. Comparison Shopping
> Compare loan fees
> Compare loan terms – fixed or variable?
> Know your lender

12. Questions?
Thank you for coming!