How to find a FNMA HomeStyle lender?

Question

Good evening all,

This is my first post on here, as I am just starting out as a committed real estate investor. Currently I am exploring different opportunities in my area (Manchester, NH), and while my goal will be to have multiple multi-family homes in the long-term, I am still looking at what else is on the market.

That said, I have come across single-families on occasion that need enough rehab as to not qualify for regular financing. I have seen posts on here about the Fannie Mae HomeStyle loan program, and I definitely think this might be helpful if I came across such a property that had the right numbers to it.

However, in much searching online and on this site, I am a little lost as to how to actually find a qualified lender. I reached out to several local banks who unfortunately were not FNMA lenders (and even if a bank is, I believe they still have to be authorized for this loan type). Does anyone have any tips on finding a HomeStyle lender (in the NH area, ideally).

Any information would be much appreciated.

Best,

Sean

Albert Bui · Answer

Just because a lender does standard conventional loans does not mean they will do fannie mae home style reno loans. On a loan that complicated Id recommend to work with someone who does a lot of them and has had a history of funding the home style product.

The 203k FHA product is only for primary residences, 1-4 unit properties, however home style can finance primary, second, and investment properties as well so there is added flexibility on home style versus 203k.

Some benefits of Homestyle over 203k are:

- no large up front mortgage insurance premium & monthly MI that FHA has. There may be MI but you have the ability to customize it and possibly not pay as many as with 203k

- you do not need equity at the time of initiating or applying for a refinancing (assumes you own the property already) vs a FHA 203k you need min 2.25% equity

- flexibility of primary/investment/second homes and rehab financing vs only primary with FHA

- less restrictions on what type of upgrades you do like luxury items are less restricted and attached ADU (accessory dwelling units) are ok since some people like to build in law quarters and such while 203k will have severe restrictions on these

Some downsides on home style are:

- your rehab cannot exceed 50% of your ARV value (determined by your appraisal).

- can only have 4 financed properties (may be an over lay but I've always seen this)

- min down is 5% vs 3.5% with FHA

- FHA 203k is not capped for rehab budget like home style with its 50% of ARV cap

Andrew Postell · Answer

@Sean Carmack yeah, unfortunately not a lot of lenders use that loan.  But they certainly are out there.  I second the advice of looking for a mortgage broker.  They represent many different banks.  It would certainly save you time in calling all the banks in your state.  They may already have a relationship.  Good luck!

Greg Downey · Answer

@Sean Carmack, my father-in-law is an expert in putting people in contact with qualified lenders.  As you are finding out, this is a pretty complicated process.  Take advantage of and expert's experience.  Drop me a line and I can hook you up.

Ruben Garcia · Answer

How does the cash-out refi work in the HomeStyle Loan?

Perry Farella · Answer

I should clarify my comments on HomeStyle. As Albert mentions above there is the 50% rule. Meaning that the rehab dollars portion of the loan cannot be  more than  50% of the Appraised finished value. Example purchasing a home for 100k and adding 50k for rehab (150k transaction to a lender) ; appraised value comes back at 200k so rehab dollars are capped at 100k  or 50% of that appraised value. I have seen some cases where the rehab  budget had to be cut back due to a less than  expected finished appraised value.

To be clear the minimum down payment for an Investor fixing & flipping is 20%. An owner occupier can get away with just 5% down.

One aspect of the loan  is that it automatically adds a 10% contingency or emergency reserve off  whatever the rehab budget will be. This is a cushion to provide some funds for an unexpected repair encountered during rehab. BUT the borrower is allowed to fund it with their own cash if desired rather than  borrower loan funds.

I hope this helps clarify HomeStyle. It is a great loan for the right person  in the right circumstance, particularly a first time investor just getting started. As above HomeStyle does enforce a 4 unit limit on financed properties one person  can  have. But if you are just getting  started that may not  be an issue. Also if you sell the  homes  regularly after rehab this limit may be workable.

Sean Carmack · Answer

Lots of great feedback here, so thank you all again. @Perry Farella, yours was one of the articles I came across in my research, so thank you!

Stephanie Medellin · Answer

I think you're looking in the wrong section - multifamily in this case refers to properties with more than four units.  Anything 1-4 units for Fannie Mae is considered single family, and there are dozens and dozens of lenders that do fannie mae loans, aka conventional loans.

Perry Farella · Answer

I would try Prime Lending. They do HomeStyle and can do it in almost all 50 states. Im personally not licensed in NH but write a Blog on HomeStyle and 203k you may want to read for information at perryfarella.com

Stephanie P. · Answer

@Sean Carmack

Fannie Mae Homestyle Renovation is for principal residences as well.

https://www.fanniemae.com/content/guide/selling/b5...

How to find a FNMA HomeStyle lender?

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