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Item: Total Mortgage
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Author: Katelyn Higgins

Fannie Mae HomeStyle

Renovation Loan

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Transform Your Home with One Loan

The Fannie Mae HomeStyle renovation loan is a unique rehab loan that enables homeowners to transform their existing spaces into dream homes. This loan allows you to finance both the purchase and renovation costs from a single source, improving property value and adding functional space. It's an ideal solution for those looking to upgrade their kitchen, modernize bathrooms, or enhance living areas.

Key Benefits

Combined Financing

Finance both purchase and renovation costs with a single loan and one monthly payment.

Flexible Property Types

Can be used for various property types, including single-family homes, condos, and multi-unit properties.

Low Down Payment

Down payments as low as 3% for qualified borrowers, making homeownership more accessible.

Competitive Rates

Interest rates are typically similar to conventional loans and lower than home equity loans or HELOCs.

Fannie Mae HomeStyle Renovation Loan Information

The Fannie Mae HomeStyle Renovation loan allows homeowners to finance both the purchase and renovation of a property with a single loan. To better understand how this loan can help you achieve your home improvement goals, you can start by speaking to one of our seasoned experts.

Eligible Properties

Condominiums or Co-op units
Duplex, triplex, or quadplex
Townhomes
1-unit second home
1-unit investment home
1-unit manufactured home
Single-family detached home

Down Payment Requirements

Minimum 5% down payment for most borrowers
3% down payment for HomeReady program qualifiers
10% for second homes
Up to 15% for investment properties (25% for refinancing)
Private Mortgage Insurance (PMI) required if down payment is less than 20%

What's Covered

Adding new floors
Building a second (smaller) home on the property
Kitchen and bathroom remodeling
Landscaping work
Mechanical upgrades (e.g., HVAC and electrical)
Adding a basement, dwelling unit, garage apartment, or suite

Additional Information

Understanding the specifics of the Fannie Mae HomeStyle Renovation loan can help you determine if it's the right choice for your renovation needs.

What's Not Covered

Building a new property or second home
Demolishing your home
Altering more than 50% of a manufactured home's structure
Temporary improvements (e.g., furniture, moveable storage units)
Certain landscaping changes

Credit Score and Income Requirements

Minimum credit score of 620
Debt-to-income ratio less than 50%
No upper or lower income limits
Loan limits up to $726,200 for single-family homes (higher in costly areas)

Interest Rates

Interest rates for HomeStyle loans are typically similar to conventional loans and lower than home equity loans or HELOCs. Rates may vary based on:

The total amount borrowed
Your credit score and financial profile
Current market conditions

Contact Total Mortgage for the most up-to-date rates and personalized quotes.

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HomeStyle Renovation Loan FAQs

Everything you need to know about Fannie Mae HomeStyle Renovation Loans

How does the Fannie Mae HomeStyle Renovation loan work?

The Fannie Mae HomeStyle Renovation loan works as follows:

You apply for the loan through an approved lender.
The loan amount includes both the purchase price of the home and the estimated renovation costs.
After closing, renovation funds are held in an escrow account.
As renovations progress, the contractor submits plans and requests for "draws" from the escrow account.
The lender inspects the work and releases funds directly to the contractor.
All renovations must be completed within 12 months of loan closing.

This structure ensures that funds are used appropriately and renovations are completed to standard.

What are the credit score requirements for a HomeStyle loan?

The credit score requirements for a Fannie Mae HomeStyle Renovation loan are:

Minimum credit score of 620
Debt-to-income ratio should be less than 50%

However, a higher credit score can help you secure better interest rates and loan terms. It's also important to note that individual lenders may have their own, potentially stricter, credit requirements.

For personalized information based on your credit profile, speak with one of our mortgage experts.

How much can I borrow with a HomeStyle Renovation loan?

The amount you can borrow with a HomeStyle Renovation loan depends on several factors:

The purchase price of the home
The estimated cost of renovations
The after-renovation value of the home
Fannie Mae's loan limits for your area

Generally, you can borrow up to 75% of the lesser of:

The purchase price plus renovation costs, or
The after-renovation value of the home

As of 2023, the maximum loan limits for Fannie Mae loans are:

Up to $726,200 for a single-family home in most areas
Up to $1,089,300 for a single-family home in high-cost areas

For a personalized estimate based on your situation and location, consult with one of our loan experts.

Can I use a HomeStyle loan for an investment property?

Yes, you can use a Fannie Mae HomeStyle Renovation loan for an investment property. However, there are some important considerations:

Higher down payment requirements: Typically 15% for purchases and 25% for refinances
Stricter qualification criteria: Lenders may have more stringent requirements for credit scores and debt-to-income ratios
Higher interest rates: Rates for investment properties are usually higher than for primary residences
Limit on number of financed properties: Fannie Mae typically allows up to 10 financed properties per borrower

It's important to note that the primary purpose of the HomeStyle loan is to improve the property. If you're considering this option for an investment property, be prepared to provide detailed plans for the renovations and how they will increase the property's value.

For more information on using a HomeStyle loan for investment properties, consult with one of our mortgage experts.

Transform your home with a Fannie Mae HomeStyle Renovation loan.

Apply Now