The Fannie Mae HomePath Renovation program has ended and has been replaced with the HomeStyle Renovation Mortgage.

The Fannie Mae HomeStyle Renovation Mortgage includes additional cost of the property itself, plus the costs of improvements and repairs in a single loan.

Having to take out 2 loans adds up to higher loan fees.

Until now borrowers needed to get a second mortgage like a home equity loan for the renovation costs after getting the mortgage.

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How Does It Work?

With a HomeStyle Renovation mortgage you can finance improvements to the property for up to 50% of the after repaired value (ARV), the market value of the home after repairs are completed.

By combining the cost of the home with the financing for repairs you will pay less in interest and lender fees than a home equity loan.

Some of the benefits of the HomeStyle Renovation loan

  • Low Down Payment – Down payment is as low as 5% of the loan amount
  • Reduced Lender Fees – Closing costs and fees are lower because it is a single loan
  • Low Interest Rate – Funds for the purchase and repairs have the same low mortgage rate
  • Down Payment Assistance – Funds for your down payment can be a gift from a friend or relative, or can come from a downpayment assistance program.

HomeStyle Renovation Mortgage Guidelines

Eligible properties

  • 1-unit primary residence to 95% LTV, 90% with ARM
  • 2-unit primary residence to 85% LTV, 75% with ARM
  • 3 and 4 unit principal residence to 75% LTV, 65% with ARM
  • 1 unit 2nd homes to 90% LTV, 80% with ARM

1 unit Investment Property:

  • Purchase up to 85% LTV/CLTV/HCLTV with FRM; 75% with ARM
  • LCOR up to 75% LTV/CLTV/HCLTV with FRM; 65% with ARM

Mobile homes and manufactured aren’t eligible.

HomeStyle mortgage loan terms

  • 30 and 15 yr fixed rate mortgage loans
  • 5/1 ARM  (Adjustable rate mortgage)

Property and Renovation Eligibility

  • Home buyers
  • Investors
  • Local government agencies
  • Nonprofit organizations

Down Payment Guidelines

Technically, Fannie Mae doesn’t have a down payment minimum. However, most lenders require a 5% down payment of the total loan amount.

HomeStyle mortgages do not look at the current value of a property, like most other mortgages. Instead they use the “after repaired” value, the value of the home after repairs have been completed. To configure the after repaired value lenders use the construction plans which are provided by approved contractors.

Borrowers may qualify for a loan amount of 105% of the ARV which may be able to allow homebuyer to use a down payment at all. Funds are not released for the improvements until the construction is completed and inspected.

There is not a set minimum credit score requirement for a HomeStyle loan. Required scores will vary lender to lender, but you can except the minimum requirement to be 680.

Read Fannie Mae’s HomeStyle Renovation Mortgage Program Information

The HomeStyle Renovation Loan allows for the following to be included

  • Designer or architect costs
  • Design and Engineering updates
  • Energy efficiency improvements
  • City permit fees
  • Inspections

How the Renovations are Performed

Renovation work must be performed by professionals that are approved with your lender. Necessary plans and drawings can be prepared before the loan by qualifying contractors and architects. Underwriters use the plans to determine the after repaired value and decide whether the improvements are within the program guidelines.

Prior to releasing funds to contractors, the home appraiser performs an inspection on the completed renovations and will notify Fannie Mae of the completion of the project. All renovations should be completed no later than 6 months after closing.

Construction should begin right away after closing. A home appraiser inspects the completed renovations and submits the information to Fannie Mae

Living in the Property During Construction

You will need to live in the home during construction. The HomeStyle Renovation Mortgage is for “owner-occupied” properties. If you cannot live in the home during the renovations your lender will use an escrow account to cover your property taxes and homeowner’s insurance.

Difference Between FHA 203K Loans and the HomeStyle Renovation Mortgage

The FHA 203k loan is a type of FHA loan that allows buyers to get the funds to buy a home and renovate or make repairs to it with a single loan. The two types of mortgages are very similar but there are some differences in the two.

For one, the down payment required for a 203k loan is just 3.5%, while 5% is needed for a HomeStyle loan. Closing costs on a HomeStyle Renovation mortgage are typically much lower than 203k loan. However, the credit score requirements are higher for HomeStyle.