HomeStyle Renovation Loan Requirements

A before and after picture of a kitchen renovated with a HomeStyle Renovation loanAre you looking to undertake a home renovation project? Whether it's an interior remodel or a whole house transformation, the HomeStyle Renovation Loan can help make your renovation project a reality. This loan is backed by Fannie Mae and offers flexible requirements, competitive pricing, and access to experienced renovation lenders. This article will discuss the requirements for obtaining a HomeStyle Renovation Loan and how it can benefit your home renovation project.

The maximum loan amount for a HomeStyle Renovation Loan is the lesser of the purchase price plus renovation costs or the property's appraised as-completed value. The loan limit for a single-family home in 2023 is $726,200. The loan limit is greater in high-cost areas and 2 to 4-unit properties.

The loan amount can also be increased with a home equity loan or line of credit, assuming the borrower meets the lender's criteria. The borrower must also have a minimum credit score of 620, although some lenders may require a higher score.

What is a HomeStyle Renovation Loan?

The HomeStyle Renovation Loan from Fannie Mae is a mortgage product that allows homebuyers or homeowners to finance the cost of home renovations with a single loan. Borrowers may concurrently finance the expenses of buying and renovating a property thanks to the HomeStyle Renovation. This loan program is available for principal residences, second homes, and investment properties and has a 620 minimum credit score requirement.

The maximum loan amount for a HomeStyle Renovation Loan is the lesser of the purchase price plus renovation costs or the property's appraised as-completed value. The loan limit for a single-family home in 2023 is $726,200. The loan limit is greater in high-cost areas and 2 to 4-unit properties.

For example, if you are purchasing a property for $100,000 and intend to invest $50,000 in renovations (for a total value of $150,000), but an appraiser determines that the as-completed value of the property is $125,000, the property value used to determine the size of the mortgage you can obtain through the HomeStyle Renovation Program is $125,000 and not $150,000. 

The loan amount can also be increased with a home equity loan or line of credit, assuming the borrower meets the lender's criteria. The borrower must also have a minimum credit score of 620, although some lenders may require a higher score.

Because it is a single loan with a fixed interest rate, the HomeStyle Renovation Loan differs from a home equity loan or line of credit. This indicates that the whole loan sum is payable when the loan period ends. In addition, the improvements must be carried out by a licensed contractor. Before closing the loan, the contractor must submit a thorough quote and get the lender's approval.

For individuals wishing to finance home improvements, buy a second property, or refinance their current mortgage and finance renovation costs simultaneously, the HomeStyle Renovation Loan may be a terrific alternative. Working with a lender that is knowledgeable about the program and who can assist you in the process is crucial.

HomeStyle Renovation Loan Eligibility

The Fannie Mae HomeStyle Renovation Loan enables homeowners to purchase a house, refinance an existing one, or upgrade their present residence. The property must be a residential, prefabricated, or vacation home with one to four units to qualify for this loan type. The loan amount cannot exceed the house's appraised value or the maximum loan-to-value ratio.

To qualify for the HomeStyle Renovation Loan, you must have private mortgage insurance if the equity or down payment is less than 20%. The loan enables renovation money to be added to the loan amount. These funds may be used for various renovation projects, including making structural or cosmetic repairs to the home's interior or exterior.

A borrower must meet the conventional loan requirements to qualify for a HomeStyle Renovation Loan. Additionally, the lender must approve the type of renovation, and the borrower must only use the money for the intended renovations.

Borrowers can finance home renovations easily with the HomeStyle Renovation Loan by combining mortgage, renovation funds, and other costs into one loan. However, before committing, it is crucial to thoroughly assess the loan's suitability for your needs and comprehend its terms and conditions.

HomeStyle Renovation Loan: Benefits and Drawbacks

You can finance your home purchase or refinance renovation costs with the Fannie Mae HomeStyle Renovation Loan. This loan is ideal for those looking to buy an older or manufactured home and improve it based on the property's projected value after renovating. To secure the loan, you must undergo an appraisal before closing, and this helps ensure that your renovation budget will suffice for the changes you have in mind.

While the loan offers the convenience of combining purchase and renovation costs into one, you may need to explore other financing options if you run out of funds during the renovation. Consider the Fannie Mae HomeStyle Renovation Loan if you aim to buy or refinance a home and renovate it simultaneously.

Qualifying for a HomeStyle Renovation Loan

You must meet the lending guidelines of a typical Fannie Mae loan to qualify for a Fannie Mae homestyle loan. This includes earning a steady income and having a good credit score. You will also need a well-thought-out plan for the renovations and a contractor lined up to carry it out. Your lender will assess your strategy to ensure it complies with the loan requirements.

Required Documentation for a HomeStyle Renovation Loan

Those seeking to purchase or refinance a home and finance renovations can use the HomeStyle loan. This loan allows borrowers to finance home and renovation costs through one mortgage. To obtain this loan, borrowers must provide documentation, such as proof of income and credit history. At the same time, the renovation contractor must submit an itemized list of project costs and their license number. With the required documents in order, the HomeStyle Renovation Mortgage can support the expenses of buying and renovating a home.

Understanding HomeStyle Renovation Loan Interest Rates

The Homestyle loan can buy or refinance a home and includes money for renovations is known as a HomeStyle Renovation Loan. Additionally, it can be applied to investment properties and second homes. The type of mortgage you select and the size of the loan balance will affect the interest rate on a HomeStyle loan.

These rates are typically slightly higher than conventional mortgages because renovation-related costs are higher. Understanding the interest rates available and determining whether they fit within your budget is crucial when deciding whether to use a HomeStyle Loan to purchase or renovate a home. You can choose whether to use a HomeStyle Loan to finance the purchase or renovation of your home by being aware of the interest rates associated with this kind of loan.

HomeStyle Renovation Loan Repayment Terms

You must submit a thorough budget for the renovations you want to make when you apply for a HomeStyle Renovation Loan. Also required is a payment schedule outlining your loan repayment strategy. Depending on which HomeStyle Renovation Loan product you use, the repayment period is typically 15 or 30 years.

You must repay the HomeStyle Renovation Loan as you would with a traditional mortgage, with payments calculated based on the total loan amount, interest rate, and loan term. Your loan servicer will establish a payment schedule for you to abide by. You are responsible for making timely monthly and additional payments necessary to cover the renovation costs.

Understanding the terms and workings of the HomeStyle Renovation Loan is crucial to making an informed choice. Comprehensive information on the HomeStyle program can be found on the Fannie Mae website. The Fannie Mae HomeStyle Renovation Mortgage details the loan's terms, including how it must be repaid. These resources will help you comprehend the loan better and decide if it's the best option for your requirements.

HomeStyle Renovation Loan vs. Other Loan Options

It's important to understand how the Homestyle loan work when contrasting it with alternative loan choices. The HomeStyle Loan is a long-term, fixed, or adjustable rate loan that provides a single loan for buying (or refinancing) a property and making improvements. For individuals wanting to purchase a fixer-upper, the loan amount depends on the home's value once the upgrades are made, which might make it an appealing choice.

Loan Requirements for a HomeStyle Renovation

  • Borrowers must meet the standard, conventional approval requirements
  • Minimum 5% down payment*
  • The minimum credit score of 620
  • Debt to Income ratio of 45%
  • Property must meet eligibility requirements

*Fannie Mae permits a 3% down payment for eligible home buyers and homeowners who want to refinance their current mortgage with the additional upgrades.

Eligible Properties Types for a HomeStyle Loan

The subject property must be a one- to two-unit principal dwelling, a single-family second home, or a single-family investment property. According to municipal zoning regulations, the number of dwelling units on the property must be appropriate. All newly built units must be joined to an existing structure, and cooperative units are not eligible.

The HomeStyle loan permits a single-family home to be converted into a multi-family home or flipped multi-family dwelling into a single-family home, in addition to standard restoration projects. Check the list of eligible property types below.

  • 1-4 Unit Primary Residences
  • FNMA Approved Condominiums
  • Foreclosure Properties
  • PUDs and Site Condominiums
  • REO
  • Short Sale
  • Single Unit Investment Property
  • Single Unit Second Home

What are the Steps of a HomeStyle Renovation Loan?

Here are the steps to purchase or renovate your home.

Step 1. Pre-approval:

Learn the maximum loan amount and terms you qualify for by speaking with a mortgage professional before starting your home search. Make sure to choose a mortgage expert familiar with the HomeStyle or FHA 203(k) financing program while shopping for a home to repair. Let your mortgage specialist discuss with your real estate agent the maximum purchase price and the loan amount you qualify for.

Step 2. Property Analysis:

Once you and your agent locate a suitable property, your real estate agent will make a comparative market study of the subject property and similar sales. This study will consider the scope and expected expenditures of the rehabilitation work, as well as the as-completed worth of the property. The analysis aims to decide how much to offer the seller. Once the seller accepts your offer, the purchase agreement is formalized.

Step 3. Contractor Work Up:

Develop the Contractor's Estimate, outlining the scope and cost of the proposed remodeling work, with a skilled contractor. Ensure the contractor has the necessary insurance requirements and meets state licensing regulations.

Step 4. Loan Application:

Submit the required paperwork to your loan officer, such as W-2s and bank statements. They will then send the sales contract, Contractor's Estimate, and underwriting documentation to the underwriter. The underwriter will order the appraisal, and the appraiser will evaluate the current condition of the property and the planned scope of improvements to determine the official, the as-completed value used to calculate the LTV and other essential loan parameters.

Step 5. Underwriting:

The Consultant will ensure that the house will be livable and safe and that the needed and appropriate work will be by the requirements of the HomeStyle product by analyzing both the property and the planned scope of work. During the underwriting process, a lender's loan expert will chat with you and the contractor about the nature and extent of the work and its associated costs.

Step 6. Settlement:

You will sign your loan documents and get the loan money at closing. The lender will open an escrow account and assign your case to one of its in-house renovation Loan Specialists. This Specialist will be your primary point of contact for all work and communication between you, the lender, the HUD Consultant, and the contractor, including payments made to the contractor during the renovation.

Step 7. Renovation Work:

After the closing, the lender, the HUD Consultant (if applicable), the contractor, and you will coordinate the work to be completed and any modifications that arise throughout the property's renovation.

Step 8. Completion:

Upon completion of the modifications, the appraiser and HUD Consultant will conduct a final inspection of the house to ensure that the project is complete and that local inspectors have granted the necessary Use and Occupancy permits. Upon completion, the last draw will be handed to the contractor. Any remaining funds in the remodeling escrow account will be moved to the principal balance.

FAQs About the HomeStyle Renovation Loan

Q. Can the Work Be Done by the Borrower?

A. With the lender's consent, the borrower may make the renovations, subject to the following three restrictions:

  • the DIY work does not exceed 10 percent of the property's value after completion;
  • only single-family, owner-occupied properties, and
    the borrower may only be compensated for the cost of supplies and contract labor that has been documented. The borrower MAY NOT get compensation for their efforts.
  • Labor and material costs associated with the renovation must be adequately budgeted by the lender so that a contractor can be engaged to meet any “Do It Yourself” repairs if the borrower cannot complete the project. 

Q. Is There a Limit on the Amount That Can Be Borrowed?

A. HomeStyle loan amounts are subject to Federal Housing Finance Agency-established maximum loan restrictions (FHFA). In places where property values vary widely, loan restrictions vary by state and, in some cases, county. Current loan limitations are available here.

Q. What are the Down Payment Requirements for a HomeStyle loan?

A. The minimum down payment is 5% plus closing expenses for a single-unit, owner-occupied property. Qualified HomeReady home buyers are allowed a 3% down payment, and community Seconds and subordinate financing are permitted, which might prevent the requirement for a down payment. As with any conventional/conforming loan, a 20 percent down payment is necessary to avoid mortgage insurance.
If you are purchasing a multi-family property or another sort of real estate, the minimum down payment is somewhat higher:

  • Duplex: 15% (or 85% LTV)
  • Investment property: 15% to purchase, 25% to refinance
  • Second home: 10% (90% LTV)
  • Triplex/fourplex: 25% (or 75% LTV)

Q. What are the Credit and Underwriting Requirements?

A. A bank considers a few key things when considering a loan request. The first is the credit history of the borrower. Banks want to ensure that borrower has a history of paying their debts on time. They will also look at the current debt-to-income ratio of the borrower to make sure they can afford the new loan. The bank will also want to ensure that the purchased property has enough equity and is in a good location.

Q. What Can You Do with a HomeStyle Loan?

A. There are many things that you can do with a HomeStyle loan. With a HomeStyle loan, you can purchase a new home, refinance an existing home, or renovate your current home. With a HomeStyle loan, you can also take advantage of the convenient features, such as no up-front mortgage insurance and a low down payment.

Q. What Is Not Covered By A Fannie Mae HomeStyle Loan?

  • New house construction.
  • Non-permanent improvements to the property, such as furniture, landscaping, or a portable storage shed or unit.
  • Demolishing a dwelling


In conclusion, the Homestyle Renovation loan is an excellent option for improving their home. This loan offers competitive interest rates and requires less cash upfront than other loans. Borrowers should budget carefully and understand the requirements before applying for the loan. The lender must inspect the property before releasing funds and ensure all work is completed before closing.

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Homestyle Renovation
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