HomeStyle Renovation Loan: What You Need to Know

In an effort to help home owners create the home of their dreams, Fannie Mae has introduced the HomeStyle Renovation loan. The HomeStyle loan is Fannie’s version of a construction/rehab/renovation loan, with flexible down payment requirements and lending guidelines.

Guaranteed Rate wants you to know—whether you’re purchasing or refinancing—how HomeStyle can help you renovate your current or existing home. As part of our ongoing effort to make the mortgage process easier to understand, here are some things to know about HomeStyle loans:

What kind of home can I buy?

If purchasing or refinancing a home as your primary residence, the HomeStyle loan allows for: single family homes, condos, townhomes, PUDs and up to a four-unit multi-family home.

Second homes and investment properties are limited to the purchase or refinance of single units which include: single family homes, condo units, townhomes and PUDs – no multi-family homes are allowed.

Manufactured housing is not permitted under this loan program.

What is the minimum down payment?

The chart below shows the minimum down payment and equity requirements. Your equity is the difference between what you owe versus what your home is worth. With HomeStyle Renovation, your equity will be based on the value of your home after the renovation is complete. For a purchase or refinance on an investment property, Guaranteed Rate requires 20% down payment or equity position on all conforming loans.

 OWNER OCCUPIEDPurchase or Refinance One UnitTwo UnitThree-Four Unit Multi-Family Fixed Rate: 5% Down/EquityFixed Rate: 15% Down/EquityFixed Rate: 25% Down/Equity
SECOND HOMEPurchase or Refinance One Unit Fixed Rate: 10% Down/Equity
INVESTMENT PURCHASE One Unit Fixed Rate: 20% Down/Equity
INVESTMENT REFINANCE One Unit Fixed Rate: 25% Down/Equity

Down payment, credit and program restrictions will vary from lender to lender and it’s best to speak with a seasoned mortgage professional for more details. 

What is the lowest credit score acceptable with the HomeStyle loan?

We can offer as low as a 660 credit score on a primary residence. Please refer to the HomeStyle Eligibility matrix located in the Resource Section (right) to confirm high balances and credit score requirements for Fannie Mae HomeStyle loans.

Which mortgage products are available with the HomeStyle loan?

HomeStyle allows for fixed rate mortgages.

How much money will I have for renovations?

The HomeStyle loan allows for a maximum of 50 percent of the post-renovation appraised value of your home; however, costs will be based on the plans, specifications and contractor’s bids.

The program will also allow certain renovation-related costs to be wrapped into the loan – some costs/fees include:

  • Inspection
  • Title update
  • Architectural costs
  • Engineering
  • Permit fees
  • Independent consultants
  • Appraisals
  • Renovation plan review costs
  • Processing of renovation draws

What types of renovations does HomeStyle allow?

Any repairs or renovations under a HomeStyle loan must add value and be permanently affixed to the home.

Can I do all the work myself or do I need to hire a contractor?

Guaranteed Rate requires you to hire a licensed contractor to complete the renovations. NO SELF HELPis allowed.

Hiring a contractor:

Renovations must be completed by a licensed contractor who is approved by your lender. The contractor you choose must be qualified, experienced and abide by all state licensing and insurance standards.

Finally, Guaranteed Rate may not refer contractors. As a borrower, you must select the contractor you choose to work with.

Will I need an architect to draw up plans?

Any plans, drawings and/or specifications used for the purpose of your home’s renovation must be completed by a registered, licensed or certified professional like a general contractor, renovation consultant or architect.

Your plans will assist the lender, establish needed financing and help your appraiser when determining the post-renovation value.

How much time do I have to complete the construction?

Renovations must be completed within 6 months from the date of loan consummation.

Do I have to pay my mortgage during the construction period?

Yes and No.

Yes, you will have to make your full monthly mortgage payment each month if you can occupy the home within 30 days and the property is habitable during the renovation period.

No, if you are unable to occupy your home during the renovation, you can escrow up to 6 mortgage payments if there is satisfactory equity and/or appraised value in the property.

Obtaining the best program fit and eligibility can be challenging as lending guidelines may vary from lender to lender. If you’re interested in taking advantage of the HomeStyle Renovation loan, contact Christine DePaepe, Guaranteed Rate Renovation Loan Division Manager, to discuss your financial goals.

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