Found that perfect home in need of a little tender loving care? The Homestyle Renovation loan allows you to both buy the home, and get repair money all in one easy loan. How cool is that?

The Fannie Mae HomeStyle ® loan is a single-close loan that includes the cost of home repairs in the overall loan amount. This loan can be used for repairs that an appraiser requires, or for changes the homeowner wants to make, and it can be used to pay for both structural and cosmetic repairs.

This loan appeals to borrowers because they only have to deal with one loan, one monthly payment and lower interest rates that cover both the purchase price and the cost of repairs. You can select either a 15- o r 30-year mortgage term, along with adjustable-rate options.

With a HomeStyle® mortgage renovation loan, your final loan amount is based on the projected value of the home after the repairs are completed. Fannie Mae’s HomeStyle ® loan is a sound choice for a buyer with top-notch credit who has access to competitive interest rates.

You can have a down payment as low as 3% as a first time home buyer, and just 5% for everyone else. Investors are allowed on Homestyle (not allowed on FHA 203k). Investors will need at least 15% down payment.

How does a Homestyle Loan Work?

The basic Homestyle rehab loan concept is fairly straight forward. You've found a house, but it needs a bit of updating or repair to make it that perfect home for you. You go get repair bids from contractors, then we simply add the homes purchase price, plus the costs of repairs together to determine how much you'll have into buying the home. 

An appraiser will need to say that the future value of the house once repairs are completed will at least equal at least what you'll have into buying the home. Your down payment requirements will be off the total of the purchase price plus repair costs, not just the purchase price.

For example, assume you find a home for a purchase price of $250,000. The repair costs are $50,000.  Your down payment requirements would be based off $250,000, and starts as low as just 3% down.

NOTE: You are not allowed to do any other repair work. It must all be done by licensed contractors

TIP: Before signing any purchase agreement, you should get a contractor bid to determine the cost of the repairs. Once you know the costs, you can decide if the purchase and repair of this home makes sense. Many people get contractor bids after buying the house, but you should really try to get bids before buying the home. 

Major Repairs

Homes requiring major repairs, which is basically any repairs costing over $50,000 will also require you to work with a third party, known as a HUD Consultant, also known as a project inspector.  This person will work as a liaison between you, the contractor, and us the lender to make sure bids meet all requirements, code, etc. 

Homestyle versus FHA 203k

There are many reasons why someone may choose a Homestyle Renovation loan versus and FHA 203k and visa versa.

The Homestyle loan is a standard conventional loan, with standard conventional credit and underwriting guidelines, while an FHA 203k loan has standard government backed FHA loan guidelines

• FHA loans allow for weaker credit profiles than conventional
• Conventional loans have stricter underwriting guidelines
• FHA loans have PMI regardless of down payment size
• Conventional loans have no PMI with at least 20% down
• Conventional programs can drop PMI in the future
• FHA loans may have more mandatory repairs (like fixing peeling paint on homes older than 1978)

My general advice to most home buyers is that once we have your full loan application, we can determine which loan you qualify for (or both), and from there, which one better fits your personal situation.