A new type of home mortgage loan will soon be available to buyers, making it possible for more families to qualify for and purchase a home.
The new loan is primarily structured for homes needing some moderate repairs before qualifying for financing. The loan will cover most of the purchase and repair costs.
It's the first time a major mortgage loan program has included funding both the home and repairs. Previously, two separate loans were required.
The loan, to be offered by lenders throughout the country soon after the first of the year, is called the Community Home Improvement Loan. It will be available to qualified modest-income homebuyers.
The new loan was planned as a joint project by the Federal National Mortgage Association (Fannie Mae) and GE Capital Mortgage Insurance Co.
Borrowers may use the loan either to purchase a home or refinance an existing home. In either case, it will cover financing of the home and needed repairs.
The funds can finance up to 95 percent of the "as completed" value of the home. All types of repair work are allowed, according to Fannie Mae.
Borrower qualification requirements are quite flexible. Up to 33 percent of a family's monthly income can be devoted to housing expenses.
Because of the unique nature of rehabilitation coverage, the Community Home Improvement Loan will require of borrowers a two-month mortgage payment cash reserve at closing, which is not required under the Community Home Buyers' Program, a Fannie Mae report stated.
Martin D. Levine, Fannie Mae's vice president for low- and moderate-income housing, said, "This unique mortgage will, for the first time, enable modest-income homebuyers to make the home improvements necessary for home purchase by obtaining a single loan. Fannie Mae also expects that this mortgage will prove useful in helping to revitalize neighborhoods."
In yet other new home financing development, many lenders are now teaming up to generate funds for new homebuilding projects through syndications.
"Banks, savings and loans, and other lenders have been forced to curtail conventional construction lending in homebuilding under the rigorous oversight of federal regulators, causing a severe shortage of capital," said Phillip R. Nicholson, a partner at Cox, Castle & Nicholson, a law firm specializing in real estate issues.
"Armed with tremendous experience in this area, many lenders are redirecting this expertise to create syndicated funds marketed to corporations, pension funds and foreign investors.
"These funds may ensure the continued flow of capital for residential development," Mr. Nicholson said.