HomeStyle Renovation

With the HomeStyle® loan, there's no second mortgage involved, no lingering home equity line of credit (HELOC), and no need to pay a second set of closing costs.

There's also no need to occupy the home you're rehabbing. Fannie Mae allows the use of HomeStyle® Renovation loan for vacation homes and investment properties.

HomeStyle® Renovation Loan Highlights

Fannie Mae's HomeStyle® Renovation loan is a one-time close home construction loan. This means that you use one loan to finance your home and its improvements.

Just about any type of renovation or repair is eligible, too, so long as the improved is permanently affixed to the home and adds value.

Eligible home improvement projects include remodeling of a kitchen or bathroom; installation and upgrading of landscaping; and, replacement of home appliances, as examples.

You can also use the HomeStyle® mortgage for "luxury" home improvements such as the addition of an in-ground swimming pool.

When you apply for a HomeStyle® mortgage, you'll share with your lender the home improvements you plan to make. Then, when your home is appraised as part of the mortgage approval process, your appraiser will assign a home value based on what your home will be worth after your upgrades are complete.

The loan-to-value (LTV) of your HomeStyle® loan will be based on your home's expected future value and not its value as of today. This allows you to borrow more than your home is worth in order to finance your construction.

Renovations must be completed within 12 months and seller concessions are permitted. This means that home sellers can pay your closing costs if you remember to add it to your contract.

When it comes to time to negotiate the home sale, remind your real estate agent to ask for seller concessions. Even in a "hot" market, sellers are often willing to help a buyer out.

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Getting Approved For A HomeStyle® Mortgage

The HomeStyle® mortgage is available via any Fannie Mae-approved mortgage lender, which means that you can get a HomeStyle® loan just about anywhere.

However, you'll want to be sure that you meet the program's minimum standards.

Fannie Mae's guidelines specify that mortgage borrowers must show a minimum credit score of 620 in order to be approved for a HomeStyle® loan. However, that minimum requirement applies to loans for primary residences only.

For borrowers using HomeStyle® on a second home or investment property, the minimum credit score required is 700.

You'll also want to make sure you meet minimum downpayment requirements.

For borrowers with good credit, the HomeStyle® mortgage allows a downpayment of just five percent, which is just short of the FHA 203k's minimum downpayment requirement of 3.5 percent.

However, this applies to 1-unit homes only.

Homes with 2-units require a 15% downpayment in order to use HomeStyle®; and 3-4 unit homes require a downpayment of 25 percent. Downpayment minimums for second homes and investment properties are sightly higher.