If you're planning to renovate your current home—or buy a property that needs work—a HomeStyle Renovation Loan from Fannie Mae may be a practical option. This type of loan combines the cost of purchasing (or refinancing) a home with the funds needed for renovations into one mortgage.
How It Works
Instead of taking out separate loans for your home and renovations, the HomeStyle loan lets you finance both with a single mortgage. This loan is available through many lenders and follows Fannie Mae guidelines.
When a HomeStyle Loan May Be a Good Fit
- Buying a fixer-upper: If you’ve found a home that needs repairs or updates, this loan gives you the flexibility to make improvements right after closing.
- Improving your current home: Use it to renovate or upgrade your existing home without taking out additional high-interest financing.
- Limited cash available: With a down payment as low as 3%, it’s a more affordable way to fund both a home purchase and renovations.
Key Benefits of the HomeStyle Loan
1. Broad Renovation Options
You can use the funds for a wide range of improvements, including:
- Kitchen and bathroom remodels
- Roof replacement
- Energy-efficient upgrades
- Landscaping or even adding a guest suite
2. Eligible Property Types
This loan works with many types of properties:
- Single-family homes
- Condos
- Multi-unit homes (up to four units)
- Manufactured homes (in some cases)
3. Low Down Payment
With a minimum 3% down, the loan is accessible to many buyers who don’t have significant upfront savings.
4. One Loan, One Payment
Instead of managing separate loans or using credit cards, the renovation costs are built into one monthly mortgage payment.
Things to Consider
- DIY Restrictions: You can only do your own work if it accounts for no more than 10% of the post-renovation property value.
- Time Limit: Renovations must be completed within 15 months of closing.
- Loan Limits: Renovation costs are capped at 75% of the home’s projected value after improvements.
Who Qualifies?
You may be eligible for a HomeStyle loan if:
- Your credit score is at least 620
- Your debt-to-income ratio is below 50%
- Your renovation project meets loan guidelines
- You’re comfortable with a larger mortgage payment that includes the cost of improvements
The Bottom Line
A HomeStyle Renovation Loan can help you upgrade your living space without needing separate financing or depleting your savings. Whether you're buying a home that needs repairs or making updates to your current home, this option allows you to manage both with one affordable loan. However, it's important to understand the guidelines and plan your renovations carefully, especially since professional work is required for most projects.
Thinking about remodeling or buying a home that needs work? Let’s talk about how a HomeStyle Renovation Loan could help you reach your goals with one simple solution.