Everything You Need to Know About HomeStyle Renovation Mortgages

You just found the perfect home for your exact needs.

It has the interior layout you love, a large yard for children, and a western-facing view that gives you a front-row seat to vibrant sunsets.

But it’s not quite perfect.

Unfortunately, it needs multiple updates, and these repairs are going to cost tens of thousands of dollars.

Or maybe you already live in a home, and while you can’t imagine moving, you know the home is in desperate need of expensive renovations. While you have considered a HELOC or a second mortgage, you’re not sure if this would be the right choice because of potentially-higher interest rates.

What can you do?

One of the best options for home improvements, either to your current home or a home you wish to purchase, is a HomeStyle Renovation Mortgage from Fannie Mae.

By providing a cost-effective solution to home-improvement financing, the HomeStyle Renovation program has become a trusted source for homeowners across the country.   

Your Essential Guide to HomeStyle Renovation Mortgages

What is a HomeStyle Renovation Mortgage?

This program allows borrowers to add financing for a home improvement into the purchase of a home or a refinancing transaction. The program gives homeowners a convenient option to make important renovations to their house, including repairs or basic remodeling improvements.

The improvements can total up to 50% of the as-completed appraisal value of the property as long as it has a first mortgage and not a second mortgage, HELOC, or another financing method attached to the home.

Benefits of the HomeStyle Renovation Mortgage

While there are many options for financing a renovation project, HomeStyle Renovation is often a more affordable, cost-effective way to fund the project because of lower interest rates compared to other programs, as well as relatively-affordable fees. This program also allows you to have a single mortgage, as opposed to a mortgage for the home purchase and another for the renovation. This can simplify your budgeting and lower closing costs.

The program can also be used for a wide variety of projects by a wide variety of borrowers, giving the program greater versatility and flexibility. From single-family primary homes to investment properties, this program helps many people improve their houses and increase property value. Because it can also be used for refinancing, it’s also available to current homeowners who want to stay put, not just buyers looking for a new home.

What Types of Projects are Eligible?

Virtually any type of project is eligible for financing through a HomeStyle Renovation Mortgage. As long as the project is permanently attached to the property and adds value, it will be eligible for financing.

HomeStyle Renovation Mortgages can be used for many different projects.

Fannie Mae doesn’t appear to have an official list of eligible projects, so the options are almost limitless. However, typical projects funded through this program include new windows, doors, and siding. It can be used for necessary changes, such as a new roof or foundational repairs, or it can be used for aesthetic improvements, such a remodeled kitchen or bathroom. You could even expand the home and add a new addition if you want.

The important element to remember is that the renovations must be “permanently affixed” to the home. Essentially, the lender will want to know that the changes will stay with the home throughout the life of the loan. Therefore, certain appliances, such as free-standing appliances or microwaves, may not be eligible. Blinds and shutters are often not eligible for the program, and while you can likely use the funds to install new carpet, you probably can’t use it to buy new rugs.

No matter what, the renovations will have to be completed within 12 months of the loan delivery.

Qualifications for HomeStyle Renovation Mortgages

In most cases, this program will be used by typical buyers who are simply looking for a comfortable home. However, HomeStyle Renovation Mortgages can be used by investors, nonprofit organizations, and even local government agencies. If you operate a nonprofit, be prepared with comprehensive financial documents to verify that your organization can handle the financial burden created by the project.

The loan must be for the purchase or a limited cash-out refinance, but 15-year or 30-year fixed-rate terms are available; there are even adjustable-rate options under certain conditions.

The property in question also needs to meet certain conditions. Single-unit to four-unit properties are eligible as long as the borrower uses the property as their primary residence. If the property is a second home, then it must be a one-unit facility. One-unit investor properties may qualify, including condos, co-ops, and planned unit development.

Loan-to-Value Requirements on HomeStyle Renovation Mortgages

The loan-to-value ratio is an important factor in real estate lending, and HomeStyle Renovation Mortgages are no exception. For purchase transactions with a HomeStyle Renovation Mortgage, the LTV is based on one of two factors: either the purchase price plus the cost of the renovation or the value of the property when the home is completed. Whichever is lower will be used in the calculation.

If the transaction is for refinancing, the LTV ratio is calculated by determining the original loan amount for the “as completed” appraisal value. There is a specific worksheet from Fannie Mae that the lender will use to calculate your potential maximum mortgage amount.

Choosing Contractors for Your Project

You will have to work with the lender to approve contractors for the project. Once you select a contractor, the lender will perform a review to make sure they are capable of completing the work. You will have to have a construction contractor in the loan contract, and plans must be prepared by a qualified general contractor, consultant, or architect. This plan will have to include timelines for stages, including both the expected start and completion dates.

If you are choosing to do some or all of the work yourself, you can get “Do-It-Yourself financing,” but this comes with tighter restrictions than if you use a contractor.   

Providing Clear Advice on Home-Renovation Financing

Want to learn more about HomeStyle Renovation Mortgages or other forms of home-improvement financing? Contact San Diego Purchase Loans and we’ll guide you through the process of enhancing your home!


Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

Amazing Service!

Chad and his team were very attentive to all of my needs, they called , emailed and checked in often. No question was left unanswered! Maria was a superstar! taking all my calls no matter the time or day and walking me through every process. The follow through was amazing and I am just so happy that my realtor referred them to me. I was originally referred to another lender that pretty much had no time for me nor did they even bother to try and find me the right loan since I am a widow with one income and a first time buyer with so so credit. I am completely happy with my loan and everything they did for me! Thank you Chad, Maria and Karina for all you did!

“Thank you for all the hard work (even on weekends!) you and your team have devoted to seeing this through in a very efficient manner. It’s been an easy process for me and, you and your team have been a delight to work with.”