Mortgages & Creative Financing

The Homestyle Renovation Mortgage: How to Use it to Fund Fixer-Upper Houses

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The Fannie Mae HomeStyle Renovation mortgage program is a popular choice with home buyers. This program is different than the Fannie Mae HomePath Loan and is a convenient and economical way to make moderate renovations or repairs to a property.

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HomeStyle Renovation Mortgage: What is It?

The HomeStyle Renovation mortgage is a single-close loan that lets you buy the home that may be in need of repairs. It is also possible to refinance the mortgage on an existing home and include the funds needed for repairs into the new mortgage. The loan amount for the HomeStyle Renovation mortgage is based on the "as-completed" value of the home rather than what the home is currently worth. A perk for this type of loan is that you do not have to occupy the property in order to qualify for this financing. In other words, you may use it for vacation of investment properties.


Related: Mortgage Interest Rates Are Rising. Will They Crush Your Rental Portfolio?

HomeStyle Renovation Loan Programs

When getting a HomeStyle Renovation mortgage, it is possible to get a 15 or 30-year fixed rate, as well as certain adjustable rates. Standard mortgage insurance pricing applies to all HomeStyle Renovation loans — but the MI will be required to cover the as-completed value, not the as-is value of the property.

Second Mortgages Allowed

With the HomeStyle Renovation loan program, it is possible to get a second mortgage, such as a Community Seconds loan, that goes up to 105% of the value of the property. It is also possible to get a non-Community Seconds type of second mortgage, although there will be an increased fee when done.

 What Improvements Are Allowed?

There are very few limits on the type of improvements that can be made with the HomeStyle Renovation loan. The only requirements are that the improvements must permanently be attached to the property and the improvements must add value to the property. Some simple examples of improvements that qualify include in-ground pools, decks, landscaping, and fences.


Related: How I Bought a Fixer-Upper Fourplex for $1 Down: A BRRRR Case Study

HomeStyle Renovation Contractor Requirements

The HomeStyle Renovation loan program allows for both a DIY option and the option to hire a contractor to perform the work. If you hire a contractor to perform the work, they must be licensed and registered. The contractor will submit all plans and specs to you and the lender for approval, as well as to the appraiser, who can then help determine the as-completed value of the home. There are special rules for DIY financing — so if you are interested in doing the work yourself, be sure to speak with your loan officer about the rules.

Have questions about the Fannie Mae HomeStyle Renovation loan program? Check out the official website here.

Have you used this loan program before? Any questions?

Leave your comments below!

Mark Fitzpatrick is a Senior Loan Consultant with Lenox Financial Mortgage Corporation based in Irvine, Calif. I specialize in helping families and real estate investors reach their real estate goa...
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    Nathan Richmond Rental Property Investor from Visalia, CA
    Replied about 3 years ago
    It sounds like this is fairly similar to the FHA 203b loan.
    Ryan Kuja Rental Property Investor from Holland MI
    Replied about 3 years ago
    Nathan Richmond- it’s similar but with FHA 203k is for OO properties only, not rentals. The occupancy requirement is a year, so you could occupy for that time then rent or sell.
    Tom Chen Real Estate Investor from Valley Stream, NY
    Replied about 3 years ago
    Hi Ryan, Just to be clear, the homestyle loan does not have an occupancy requirement correct?
    Jennifer Plowman Investor from Greensburg, Pennsylvania
    Replied about 3 years ago
    My husband and I just closed on a new investment property using a renovation loan. We got the subject property under contract below market value, negotiated the contractors bid and that was rolled into the loan. We start work next week and our contractor will get paid on draws from the bank. We plan to relist as soon as work is completed (if it doesn’t go right away we will rent it out and do a cash out refi on it). The only hitch is that we will need to wait 90 days after we close to get into a sales agreement with an FHA buyer. An FHA buyer is more likely in our price range but it won’t hurt to throw it on the market and see what happens. If this process goes as smooth as we are hoping it does, we plan to use this loan product again in the future. Whether you plan to sell or hold it as a rental and refinance it to pull your cash back out since the new appraisal should be considerably higher than your original purchase price- it is a great loan product for people who want to flip or improve and do not have a ton of cash on hand to fund the entire project. In this case you can obtain the loan for likely a 15% (sfh) down payment and your entire project is funded through the loan itself. Fingers crossed!
    Carmen Glancy Investor from Boise, Idaho
    Replied about 3 years ago
    Thank you, it is great to know there are more than just the standard financing options!