What is the FNMA HomeStyle® Renovation Loan?
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.
The Fannie Mae HomeStyle® Renovation Mortgage is incredibly flexible and can be used in a wide variety of scenarios. If a homeowner has an eye on a fixer upper and wants to turn it into a dream home, it’s likely a HomeStyle® Renovation can help make it happen.
Fannie Mae HomeStyle® Renovation Program overlays and eligibility during the pandemic include:
- Renovations less than $35,000.00 (AFR refers to these as Limited Transactions)
- Home must be habitable during renovation
- Repairs must be non-structural (see ineligible repairs on program matrix)
- Eligible property types:
- 1-2 Unit Primary Residences,
- 1 Unit Second Homes,
- FNMA Approved Condos,
- Multi-wide Manufactured Homes
- Investment properties are not permitted
FNMA HomeStyle® Renovation Loan Basics
- Construction consultant required for structural repairs or repairs over $35,000
- 620 minimum qualifying credit score
- Repairs or improvements must be permanently affixed to the real property and add value to the property
- 15 year and 30 year Fully Amortizing fixed term options
- No minimum dollar amount required for repairs
What are the benefits?
Loan amount based on “as-completed” value
The HomeStyle® Renovation Program offers borrowers financing based on the value of the property after the renovations have been made. This allows borrowers to qualify for a higher mortgage based on the property value after renovations.
Can help save loans that have repair contingencies
Home purchases that may have otherwise been thwarted by costly repair contingencies can be saved with the FNMA HomeStyle® Renovation loan. With this program, borrowers can finance the cost of the repairs into the loan amount and ensure they still get the home they want.
Not just for owner occupied
Unlike many renovation loan options, the FNMA HomeStyle® can be used for one unit second homes and one unit investment properties. This can create an excellent opportunity for building instant equity in a vacation home or rental property, or provide financing for a flip.
Luxury Improvements Allowed
Most renovation loan programs don’t allow the financing of luxury items on the home – improvements such as swimming pools, hot tubs, tennis courts, and outdoor kitchens. These projects are all eligible through HomeStyle®!
Who is eligible for a FNMA HomeStyle® Renovation Loan?
Eligibility will be determined by examining the borrowers’ income, assets, liabilities, and credit history and score, as well as the market value and condition of the property to be financed.
In which scenarios is the FNMA HomeStyle® Renovation Loan useful?
This program could be the ideal solution for investors looking to rehab a property and rent it, or even sell it after the repairs are completed. Under this program, investors can purchase a one unit property and include funding for renovations in the same loan.
The HomeStyle® Renovation is also advantageous for borrowers who wish to refinance an existing mortgage and take on a substantial home improvement project. This may be a lower cost alternative to a home equity line with a variable interest rate or a second mortgage.
Buying a Home with a FNMA HomeStyle® Renovation Loan
By providing financing for repairs and improvements, this program can create home buying opportunities. It can be hard for house hunters to find a property that has everything they are looking for. Perhaps a home is too small, the chopped up floor plan is unappealing, or the dated kitchen just doesn’t suit today’s buyers.
With a HomeStyle® Renovation it’s not necessary to find a perfect home on the market – buyers just need to have a vision for how great the home could be with a little work!
FNMA HomeStyle® Renovation Loan Refinancing
The HomeStyle® Renovation loan is often thought of for purchase transactions, but it can also be used to refinance an existing mortgage when homeowners want to make repairs or renovations to their property. There is also a limited cash-out refinance option for this program.
Other Programs to Consider
If the FNMA HomeStyle® Renovation loan is not an ideal fit for a particular scenario here are a few other products to explore:
- Cover purchase and repairs or refinance the rehabilitation of an existing home: FHA Standard 203(k) Loan
- To finance projects on a HUD home that requires minimal or cosmetic repairs: FHA 203(b) Loan with Repair Escrow
- For military and veteran borrowers looking to finance minor updates at a cost under $35,000: VA Renovation Loan