Updating a Home With a Fannie Mae Homestyle® Renovation Mortgage

March 10, 2016

Do you have clients who want to renovate their current home or purchase a fixer upper, but their scenario just doesn’t fit guidelines of the rehabilitation loan programs you’ve researched?

It’s time to take another look. The Fannie Mae HomeStyle® Renovation Mortgage is incredibly versatile and accommodates a wide range of situations. If there’s a vision for giving new life to an old home or turning a distressed property into a dream home, it’s likely a HomeStyle® Mortgage can help make it happen.

This loan allows borrowers to purchase a home that needs repairs, or refinance their existing home and include the necessary funds for renovation in the balance of the new loan. The loan amount is based on the “as-completed” value of the home rather than the present value. Improvements must be permanently affixed to the property and add value, and the work must be performed by a contractor – do it yourself projects completed by the homeowner are not permitted.

A few highlights that set this program apart:

  • Available for purchase or refinance.
  • Luxury items such as pools are eligible improvements.
  • No minimum dollar amount required for repairs.

When can you leverage the HomeStyle® Renovation Mortgage?
Scenario 1:

Your clients fell in love with a home in the perfect neighborhood, just the right size, great backyard…but it needs a new roof and some electrical work. They think it’s a great value even considering the cost of repairs, but just don’t have the cash available to do the work.

Scenario 2:
The owner of an investment property with a nice steady rental income wants to make some improvements to keep the home appealing to renters, but doesn’t have the funds available for the updates and is concerned about the cost of an equity line or taking cash out.

Scenario 3:
The appraisal on a purchase deal you’ve been working on just came back showing significant plumbing work is needed.

HomeStyle® Basics

  • 620 minimum qualifying credit score.
  • Available in 15 and 30 year fixed terms – ARMs are not permitted.
  • Eligible properties include 1 – 2 unit primary residences, 1 unit second homes and investment properties, PUDs and Fannie Mae approved Condominiums.
  • Property must have been completed for at least one year.
  • No minimum dollar amount required for repairs.
  • LTV ranges from 95% on a 1 unit principal residence Purchase to 75% on a 1 unit investment property limited Cash-out Refinance.

Photography by [bombaert] © 123RF.com

Subscribe To Our Newsletter

Sign up with your email address to receive news and updates.