Fannie Mae HomeStyle Rehab Mortgage

The Loan Tree is New Jersey’s leading provider of Fannie Mae HomeStyle mortgages for the past 30 years.  The Fannie Mae HomeStyle Renovation Mortgage program enables borrowers to purchase a home that needs repairs, remodeling or renovation. The program also allows for the refinance of an existing mortgage while providing additional funds for your renovation project while offering the benefit of one low fixed rate.
 
One of the many benefits of the HomeStyle program include being able to use the “after improved” appraised value to calculate your available mortgage amount.  The “after improved” value is a higher value because it assumes that the renovation work has already been completed. Unlike traditional Conventional and FHA mortgages which limit your mortgage amount ONLY on the “current value” of your home, the HomeStyle provides up to 95% of the “after improved” value which means that your renovation dreams are more likely to become a reality.
 
It can be exhausting finding a suitable home to buy that offers all of the comforts and features that you’re looking for. Disrepair, limited living space, energy inefficiency and outdated kitchens and bathrooms can rule out purchasing a home even if it’s in a great location. As housing stocks dwindle in NJ, homeowners may also choose to take advantage  of a HomeStyle Renovation refinance mortgage which can pay off your exiting mortgage AND include the cost of your renovation project. A single mortgage can add up to lower closing costs and lower rates. Previously, consumers had to turn to second mortgages and home equity loans to pay for energy upgrades or renovation projects after they had already purchased the home with a first loan. 
If the renovation costs for the home purchase or refinance exceeds the Fannie Mae HomeStyle $15,000 threshold, then the participation of a HUD-licensed HomeStyle Consultant is required. An available list of  and fee schedule for a HomeStyle Consultant can be found here.  Should the renovation cost not exceed the $15,000 threshold, then a Consultant is not necessary.  The Consultant remains involved and will assist you throughout the entire renovation project.  Moreover, dual disbursement funds for the various phases of work in your renovation account will not be released until the work is certified complete by the HomeStyle Consultant. 
 

Eligible properties include:

  • Principal residences, one to four units
  • Single-unit second homes
  • Condos and Townhomes
  • Single-unit investment properties

Manufactured or mobile homes are not eligible.

Types of renovations mortgages include:

  • 15- and 30-year fixed-rate mortgages

Note from Fannie Mae: “The original principal amount of the mortgage may not exceed Fannie Mae’s maximum allowable mortgage amount for a conventional first mortgage.”

Qualifying and down payment requirements:

For an owner occupied and second home purchase, the minimum down payment requirement is 5% whereas the minimum down payment is 15% for a one-unit investment property purchase. The minimum down payment requirement pertains to the sum of the purchase price, the renovation costs and the required 10% or 15% renovation reserve requirement. 

With all that there is to know, why not call The Loan Tree for assistance in navigating the application and approval process. 

Items that can be financed into the HomeStyle mortgage: 

When it comes to renovations, the HomeStyle mortgage offers a generous range of costs for inclusion in the loan including:

  • Architects/Blue Prints (if needed or required)
  • HomeStyle Consultant fee(s)
  • General contractor estimate for repairs
  • Your City/Town building department permit(s)
  • Renovation project reserves (10% or 15% as determined by the Consultant)

All renovations performed under a HomeStyle mortgage must be done by your chosen General Contractor who is properly licensed and properly insured.  General Contractors and Architects with professional licenses and credentials will be required to prepare the necessary drawings and plans as part of the loan approval process. This assists underwriters in their determination of completed value as well as whether the proposed improvements are cost effective.

Once the loan closes, the work must begin within 30 days and must be completed within 6 months. A HomeStyle Consultant or appraiser will inspect all work and submit a completion certificate to Fannie Mae before funds can be paid to your general contractor for that completed phase of the work. Any unused renovation reserves left over after the renovations are completed can be used for additional work or be paid as a principal reduction of the mortgage.

What to do while the work is underway:

If the Consultant determine that the property is uninhabitable during the renovation phase, up to 6 months mortgage payments may also be financed into the new mortgage to pay for the principal and interest, the homeowner’s insurance and property taxes without disruptions.

What’s the Difference Between the HomeStyle Mortgage and FHA 203k Mortgage?

Fannie Mae HomeStyle and FHA 203k mortgages both offer the ability to finance improvements in concert with a purchase or refinance of your home. The HomeStyle loan’s minimum down payment is around 5 percent, while FHA 203k’s is only 3.5 percent. While the FHA 203K allows for mortgage amounts up to 110% of the “after improved” value of your home, the Homestyle is capped at only 95%.  The HomeStyle also typically requires higher qualifying credit scores but feature lower closing costs than those commonly charged on FHA 203k loans.

What makes the HomeStyle program so unique is that it allows for the financing of primary residences, second homes as well as 1 unit investment properties. Just like the  with a FHA 203K program, the borrower must use a approved, licensed general contractor to do the renovation work.

Why not call or email us for additional information at 732-988-5000 202 or akelly@theloantree.com.  Or you can click here MORE INFORMATION and we will respond to your request as soon as possible.