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The Secret to Making Sweat Equity Work for You!
FHA loans and Freddie Mac HomePossible® loans allow a borrower to furnish labor and/or materials on a property being purchased up to the amount of the entire cash investment, including the down payment and closing costs. But it only works if you follow the rules!
- Existing: Buyer can perform only the repairs or improvements that are listed on the appraisal.
- Work to be performed must be broken down with value assigned to each item in sales contract.
- Appraisal must be done before any sweat equity items are completed.
- Existing: Work completed before appraisal is done.
- Proposed: Work completed before appraisal is done. Clean up, debris removal, or general maintenance.
Labor Value Determination:
- Existing: Appraiser or cost estimating Service, must provide the allowable contributory value of each item performed.
- Proposed: Appraiser or cost estimating service estimate must provide the allowable contributory value of each item performed.
Material Value Documentation
- Existing: Receipts and proof of source of funds to purchase materials.
- Proposed: Receipts and proof of source of funds to purchase materials.
- Existing: Appraiser must inspect and state all repairs or improvements completed in a workmanlike manner.
- Proposed: Appraiser must inspect and state all sweat equity work is completed in a workmanlike manner.
source: Mortgage Currentcy