mortgages :: SONYMA :: Remodel New York Program

SONYMA - Remodel New York Program

The Remodel New York Program provides below-market interest rate financing to qualified first time homebuyers for the purchase and renovation of homes in need of improvements or repairs. Under Remodel New York, SONYMA will finance both the purchase and the renovation of the home with one mortgage.

Features and requirements of the Remodel New York Program.

• A fixed mortgage interest rate that is lower than the interest rate for conventional fixed rate loans;
• 1 point or origination fee;
• Financing of up to 97% [based on the lower of (a) the purchase price of the home plus the cost of renovations, or (b) the "as-improved" appraised value of the property] for qualified borrowers and homes;
• A low minimum borrower cash contribution requirement of 3% of the value of the property;
• 100 day interest rate lock from loan application;
• Term of 30 and 40 years only (interest rates for 40 year mortgages are 0.125% higher);
• No prepayment penalties;
• Certain closing costs associated with the home renovation can be financed with SONYMA's mortgage. The remaining closing costs may be paid from SONYMA Closing Cost Assistance funds.

Eligible Renovations

Includes repair or replacement of plumbing, electrical, and heating systems, structural repairs, additions, modernization of kitchens and bathrooms, new siding and windows, etc.;

The renovation cost must be:

• At minimum, the lower of (a) $5,000 or (b) 5% of the property's appraised value after the proposed repairs are made; and
• At maximum, 40% of the property's appraised value after the proposed repairs are made.

Eligible Borrowers must:

• Be a first-time homebuyer as defined by SONYMA
  (This requirement is waived if the borrower seeks to purchase a home located in a Federally designated Target Area . See Exceptions for Borrowers for more details);
• Meet SONYMA's credit underwriting standards. Applicants must have:
  • a steady job;
  • a good credit history;
  • sufficient income to make the mortgage payment and meet other debt payments; and
  • sufficient cash, savings, or other assets for downpayment and closing costs;
• Meet SONYMA's Household Income Limit requirements;
• Occupy the SONYMA-financed home as their permanent residence.

Note:If you currently own a residential investment or vacation home and you intend to retain ownership of the home, you will not qualify for SONYMA financing even if you are attempting to purchase a home located in a Target Area.

Eligible Properties must:

• Be located in New York State;
• Have a combined sales price and cost of renovations that does not exceed SONYMA's Purchase Price Limits;
• Not be used for any business or commercial purpose;
• Be one of the following property types:
  • Existing one family home. Condominiums are eligible provided the condominium association permits the proposed renovations. (Manufactured housing and cooperatives are not eligible);
  • Existing two family home that is at least five years old as of the SONYMA loan application date and has been used only as a residence during the past five years;
• Be a maximum of 5 acres (exceptions can be made on a case by case basis);
• Have at least 500 square feet of living space (exceptions can be made on a case by case basis).

Additional Considerations:

• In the event that the home is not habitable during renovation, SONYMA permits borrowers to finance up to 6 mortgage payments to help offset the cost of two housing payments;
• Applicants are required to hire an independent construction professional as a consultant whenever the proposed renovations exceed $15,000 or when the renovations involve structural alterations or repairs, asbestos removal, or removal of environmental or safety hazards. The consultant, who must be approved by the Federal Housing Administration (FHA), will assist applicants in: (a) determining what repairs are needed, (b) preparing the work specifications and cost estimates, and (c) selecting the contractor(s). The consultant's fee may be financed by the mortgage loan;
• On the date the home purchase is closed, the funds for the renovations will be placed in an escrow account held by the lender. Funds will periodically be paid to the contractor(s) by the lender as the renovation work progresses and after they have inspected the work and determined that it has been completed in a satisfactory manner. SONYMA will require that 10% of each payment to the contractor be held back by the lender until the project has been satisfactorily completed;
• Borrowers will be required to place at least 10% of the estimated cost of the repairs into the escrow account mentioned above to cover any unforeseen repairs or deficiencies discovered once the construction begins. This reserve amount may be financed with the loan proceeds;
• Contractors must be:
  • sufficiently experienced to perform the proposed renovations;
  • able to complete the renovations in a timely manner;
  • adequately insured to cover against potential injuries to employees or sub contractors; and
  • where required, properly licensed;
• Applicants cannot act as their own contractor unless construction contracting is their full time occupation. SONYMA will not permit borrowers to be compensated for "sweat equity" in the transaction;
• The renovations must be completed within 6 months of the home purchase closing date;
• A SONYMA mortgage may not be used to refinance an existing mortgage and SONYMA mortgages are non assumable;
• All applicants must complete a homebuyer education course;
• SONYMA will require a 1% lock in deposit to be paid by the applicant at loan application. The deposit will be refunded to the borrower or credited towards closing costs except if the applicant cancels or withdraws their loan application, or makes a material misrepresentation on their loan application;
• All loans with less than a 20% downpayment will require private mortgage insurance (PMI);
• All loans must be approved for pool insurance by SONYMA's mortgage pool insurer;
• All borrowers are subject to a potential "recapture tax" under Federal law;
• An applicant whose spouse, domestic partner, fiance, or fiancee (who is not an applicant) does not meet SONYMA's definition of first time homebuyer and therefore, is not eligible for financing.
• An applicant who has used more than 10% of their current residence (or a prior residence) for a business or commercial use in the past year, is not elligible for financing.

Regarding Condos:

Borrowers purchasing a condominium unit must satisfy certain special requirements.
To be eligible for the Remodel New York Program, the condominium association must allow the proposed renovations.

Exceptions for Borrowers Purchasing Homes in a Target Area:

Federal law provides certain special incentives for applicants purchasing homes in Federally-designated Target Areas. SONYMA is committed to helping rebuild these neighborhoods.

The incentives are as follows:

• The first time homebuyer requirement is eliminated;
• Household Income and home Purchase Price Limits are higher
• Two family homes that are newly constructed or are less than 5 years old are eligible. .