The pro is that you can wrap the renovation money into the loan and the loan has an interest rate similar to a standard primary residence purchase. This is a benefit over hard money or having to go hunt for a separate HELOC.
The con, is that you cannot treat these like hard money or be at risk for committing mortgage fraud which is rampant right now and everyone is cracking down hard.
@Mario Essig what if they were good at the loan but not within that 25 mile radius?
Now, as far as pros and cons to this loan there are MANY...but some of this will depend if this is a primary home or an investment property. Since this is an investment property website, I'll address it like that.
PROS
Low Costs
Low Rate
Do Not Have to Refinance Out
CONS
Slow closing time
Will ALWAYS need a down payment
And those "CONS" are exactly why this loan is hardly EVER used by investors. Meaning, if you are using the BRRRR method, you are buying properties "Off Market". And when buying properties off market a closing time of 45 days will not work. You MUST close quickly. So a different loan type would be needed.
But the downpayment requirement is also a HUGE deterrent to the HomeStyle loan. Let's compare it against the most common acquisition loan, Hard Money (there are others but HM is the most common). In most cases if you are buying a holding Hard Money will lend you 75% of the ARV. So if you identify a property with a ARV of $200,000, and you can purchase and rehab at $150,000....then your downpayment is ZERO! With the HomeStyle loan, you would need $30,000 AT MINIMUM to close on a home like that. AND you won't be able to refinance to receive any money back either. You just sunk $30,000 into a property that you cannot get back....and with HML...you sink $0. That's the comparison...and there's really no comparison. And that's why HomeStyle is not used very often.
The way the HomeStyle loan works best is if you are buying a primary home (which HML cannot do) or if you have owned a property for several years and need to do rehab to it. Those two cases the HomeStyle can work best.
Anyway, I hope this helps in some way but feel free to ask anything additional if you need. Thanks!