Fannie Mae HomeStyle Renovation Mortgage

The Fannie Mae HomeStyle Renovation Mortgage could be the perfect solution for you purchasing a home that needs a little TLC or dreaming of renovations for your current home.

This program allows you to roll renovation costs into a single loan, making it easier to finance your home upgrades. Whether you’re looking to buy a fixer-upper or refinance and renovate your existing property, this loan program provides the flexibility to turn your vision into reality.

In this guide, we’ll explain everything you need to know about this financing tool and how it can help you achieve your home goals.

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What Is the Fannie Mae HomeStyle Renovation Mortgage?

The HomeStyle Renovation Mortgage is a loan program designed for those who want to purchase or refinance a home while including the cost of renovations in their mortgage. This means you can take an outdated property, give it the upgrades it needs, and make it move-in ready—all with one monthly payment.

This loan is particularly attractive for buyers considering properties that need repairs before they’re habitable. Instead of juggling multiple loans or dipping into savings, everything is wrapped into one simple financing package.

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Key Benefits of the HomeStyle Renovation Mortgage

The HomeStyle Renovation Mortgage offers several advantages, making it an appealing option for many homeowners and buyers. Here are some of the standout benefits:

1. Boost Your Property Value

• Renovations increase the home’s value, helping you build equity faster.
• Upgraded properties can meet or exceed loan-to-value benchmarks, making them a more sound investment.

2. Flexible Repair Options

• From cosmetic upgrades like kitchens and bathrooms to structural improvements, most permanent repairs are eligible.
• Approved projects can range from fixing a roof to adding additional living space.

3. Versatile Property Types

• Works for owner-occupied homes, second homes, and even one-unit investment properties.
• Eligible property types include condos, planned unit developments (PUDs), and even manufactured homes (with some restrictions).

4. One Loan, One Payment

• Renovation costs are included in your mortgage, eliminating the need for separate loans or personal savings.

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How Much Can You Finance?

Loan limits depend on the property type and intended use. Here’s a breakdown:

• Principal Residence (1-unit): Finance up to 97% of the home’s value with a fixed-rate mortgage (often capped at 95% by lenders).
• Principal Residence (2-units): Finance up to 85% of the value.
• Principal Residence (3-4 units): Finance up to 75% of the value.
• Second Homes: Finance up to 90% of the value.
• Investment Properties (1-unit): Borrow up to 85% for purchases and 75% for refinances.

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What Renovation Costs Are Covered?

The HomeStyle Renovation Mortgage is unique because it covers a wide range of renovation-related expenses, including:

• Labor and Materials: All costs for permanent renovations.
• Soft Costs: Architect fees, permits, licensing, and inspections.
• Contingency Reserves: Funds for unexpected expenses, particularly for multi-unit properties.
• Payment Reserves: Up to six months of principal, interest, taxes, and insurance (PITI) if you cannot occupy the home during renovations.

By consolidating these expenses into a single loan, you can avoid the need for additional loans or tapping into personal savings.

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Working with Contractors and Plans

The flexibility to choose your contractor is a major advantage of the HomeStyle program, but there are guidelines to follow:

• Contractor Approval: Lenders will require contractors to meet qualification standards, often verified through a contractor profile report.
• Detailed Plans: Before work begins, detailed renovation plans prepared by a licensed contractor, consultant, or architect must be submitted.
• Timelines and Changes: Contractors must adhere to agreed-upon timelines, and any modifications require submitting a HomeStyle Change Order Request.

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Who Should Consider This Program?

The HomeStyle Renovation Mortgage is designed for a variety of homeowners and buyers, including:

• Fixer-Upper Buyers: Ideal for those purchasing homes that need significant repairs to become livable.
• Current Homeowners: A great option for those who want to upgrade without taking out a separate loan.
• Investors: Perfect for increasing the value and appeal of properties before renting them out.

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Limitations and Considerations

While the HomeStyle Renovation Mortgage is a powerful tool, it’s important to understand its limitations:

1. No Cash-Out Option: Refinances under this program do not allow cash back at closing.
2. Renovation Cost Caps: Limited to 75% of the lesser of:
   • Purchase price + renovation costs, or
   • The “as-completed” appraised value.
3. Restrictions for Manufactured Homes:
   • Renovation costs are capped at 50% or $50,000, whichever is lower.
   • Structural changes are not allowed.
4. DIY Projects: Financing for do-it-yourself renovations is capped at 10% of the home’s value and is only available for one-unit, owner-occupied properties.
   • Sweat equity (your labor) is not reimbursed.

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Why Choose the HomeStyle Renovation Mortgage?

This program makes it easier to transform properties into the home of your dreams without the hassle of multiple loans or upfront costs. With its ability to increase property value, provide flexible financing, and cover a variety of renovation costs, it’s a great option for homeowners, buyers, and investors alike.

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How to Get Started

If the HomeStyle Renovation Mortgage sounds like the right fit for your home goals, our team is here to help. We’ll guide you through every step of the process, from selecting a contractor to securing the loan.

Ready to Take the Next Step?

Book a consultation with us, and let’s get started on making your dream home a reality.