Are you struggling to locate the perfect home? Maybe you’ve stumbled upon a property in an ideal location, but it’s missing several of your must-have features.

Are you building the home of your dreams, or renovating one that already exists? The latter might be a more fiscally responsible option – but how can you make it happen? With this guide, you’ll find out exactly how Fannie Mae’s HomeStyle Renovation Loan enables homeowners to fund renovations. Plus, discover an alternative lending solution that allows for even greater access to capital and renovation possibilities when creating your dream residence!

HomeStyle Renovation Loans

With a Fannie Mae Homestyle Renovation Loan, the dream of owning your own home and making upgrades to it can easily come true! Rather than paying multiple closing costs on various loans and making various payments each month, this government-sponsored mortgage will offer you one loan product with only one set of closing costs that cover both the purchase price of the home as well as future renovations. You’ll be able to make just one monthly payment for all these expenses.

If you’re in the market for a pre-built property or looking to refinance and renovate your current home, then these loans are exactly what you need. You can choose between 15-year fixed or adjustable rate mortgages with a cap of $548,250 for single family properties; however, if you live in a more expensive area that number could be as high as $822,375!

When it comes to loans on multifamily properties, the limits are capped at $685,400 for four-unit dwellings and can rise up to a maximum of $1.5 million in more expensive areas.

How Does a HomeStyle Renovation Loan Work?

When you work with a mortgage broker to get yourself secured with a HomeStyle Renovation Loan, Fannie Mae is not the one directly lending the money. Instead, this government-backed entity generally buys mortgages in order for them to extend loans and provide financial help to those who are considered high-risk borrowers.

When taking out a HomeStyle Renovation Loan, you’ll have the peace of mind knowing that your seller will be compensated at closing. The only time renovation funds are released are after:

  • The homeowner selects an approved contractor to complete renovations.
  • The contractor sends renovation plans to the bank to request a draw.
  • An inspection is done on the property to confirm the completion of the renovation.
  • The bank compensates the contractor directly.

With the HomeStyle Renovation Loan, you can borrow up to 95% of your home’s post-renovated value. For instance, if your renovated property is estimated to be worth $375,000 – you could qualify for a loan up to $356,250!

What Can You Use a HomeStyle Renovation Loan For? 

Whether you’re a current homeowner, real estate investor or prospective buyer, HomeStyle Renovation Loans are the perfect solution for completing nearly any type of home upgrade project within 12 months after closing. It’s important to note that projects that are not permitted include:

  • Demolition of the property
  • Construction of a second property
  • Temporary improvements (i.e., storage sheds)

It is important to remember that structural improvements on manufactured homes may not exceed 50% of the estimated appraised value or a maximum of $50,000.

From closing costs to temporary living expenses while renovating your home, these loans are the perfect solution for covering different kinds of fees.

The Benefits of HomeStyle Renovation Loans 

  • Your borrowing power is based on the property’s after-renovation value, unlike home equity loans and other loan renovation projects.
  • You can get a loan to purchase and renovate a new property or refinance and renovate a property you already own.
  • You could get approved with a down payment as low as three or five percent of the loan amount.
  • You can use the loan on a vacation home, investment property or secondary residence.
  • You won’t pay double closing costs.
  • You won’t pay upfront mortgage insurance.
  • You don’t need excellent credit to qualify.

What Are The Requirements of a HomeStyle Renovation Loan? 

Property Requirements

Wondering if the property you’re considering is eligible for a HomeStyle Renovation Loan? Here’s a list of properties that could qualify:

  • Condo and co-op units
  • Single-family homes
  • Townhomes
  • Single-unit investment properties, manufactured homes or second homes
  • Double, triple or quadruple-unit properties

Down Payment and Loan to Value

If you’re looking to secure a HomeStyle Renovation Loan, then the usual requirement is for a down payment of five percent. However, if you are eligible for Fannie Mae’s HomeReady program, then your required down payment could be reduced to as little as three percent!

Here are the downpayment requirements for both investment and multifamily properties:

  • Single-unit investment property: 15 percent down payment (or 25 percent down payment for refinance transactions)
  • Second home: 10 percent down payment (90 percent loan-to-value)
  • Double-unit property (i.e. duplex): 15 percent down payment (85 percent loan-to-value)
  • Triple or quadruple-unit property: 25 percent down payment (75 percent loan-to-value)

Credit Score

Fannie Mae requires a credit score of at least 620, and your debt-to-income ratio shouldn’t exceed 45 percent.

Contact Sword Mortgage To Learn More

At Sword Mortgage, we believe that an informed customer is the best kind of customer. Therefore, our loan officers will take the time to fully explain your options and help you understand all aspects of your unique situation before making a decision. Call (770) 757-5750 to speak to a mortgage professional or get started on your loan application process today.