Renovation Mortgage Loans
FNMA Homestyle Renovation Loans
The HomeStyle Renovation is a convenient way for borrowers to purchase a home that needs moderate repairs, or refinance their current mortgage on their existing home and include the necessary funds in the new loan amount to complete their renovation. The Homestyle Loan provides an economical way to make improvements instead of applying for a second mortgage, home equity line of credit, or other more costly method. Unlike FHA renovation loans, these FNMA loans will generally require credit scores above 700 .
- FNMA Homestyle program: Renovation/repair costs are allowed up to 50% of the “After Completed” value of the property.
- Maximum Financing Available: 95% after improved value
- Eligible Improvements: All improvements must be permanently affixed to the property and add value. Appliances must be built-in; free standing appliances are not eligible. Luxury items are eligible (e.g. swimming pools, spas, outdoor kitchens or fireplaces, etc.)
- Draws: An escrow account is established and funds are released as work is completed. A maximum of 5 draws are allowed.
- Contractor Requirements: All work must be completed by one (1) licensed general contractor. One (1) specialty contractor allowed for work such as foundation, pool, well/septic etc.
FHA Renovation Loans (203-K)
FHA 203-K loans are a favorite of first time homebuyers that have their eye on a house that is in need of repairs. These loans require a bit of determination and patience on the borrower’s part as they involve getting bids from licensed contractors which result in more time spent from offer to closing. These loans fully fund at closing with an escrow hold-back that is released in stages as the contractor completes the work.
- Limited 203(k) program: Intended to assist homeowners with basic repairs costing from $5,000 to $35,000
- Amount of Financing Available: Adjusted As-Is value plus improvement costs, or 110% of the after improvement value
- Down Payment: 3.5% or more down payment is typically required. Family gift money is allowed for down payment.
- Credit Scores: Requires middle credit score greater than 640
- Loan Limits: Up to $314,827 (Higher loan limits available in certain high cost areas)
- Occupancy: Owner occupied residence only