Whether you are planning to install new ceilings or want your complete home to look new, you are going to need a lot of money. There is a greater chance that you will need to borrow some money to achieve this dream. Complete home renovations cost a lot of money that may be probably even bigger than your savings. But instead of borrowing money from your friends or family, you may consider a Fannie Mae Homestyle loan. We will get to know all of it in this brief guide about how it can help you and how to apply for it.
What is Fannie Mae Homestyle Loan?
A Fannie Mae Homestyle Loan is a service provided by the government that allows individuals to source funds for the renovation and purchase of a property. It can all be included in a single loan.
You must be curious how this loan is different from the traditional mortgage and why you should consider this and not that. Well, Fannie Mae Homestyle Loan is different from typical home loans that allow you to get funds for purchasing a property to renovate it at once. You do not have to use separate loans for buying the property and renovating it.
It is beneficial because it allows borrowers to face only one set of closing costs and pay a single loan payment every month.
Borrowers can apply for this loan to refinance or remodel their existing home. They feature 15 or 30 year fixed-rate or adjustable-rate loans. You need to make a down payment of 5% of the total cost of the property, including repairs. However, first-time buyers may be eligible for 97% LTV.
Maximum Amount to Borrow with Fannie Mae Homestyle Loan
This loan provides 95% of the borrower’s property’s total costs ( including renovations). However, the maximum amount this loan can offer is $548,250. That means, if 95% of your home’s total value is less than or equal to this maximum limit, you may get this loan amount. If it exceeds the maximum limit, you won’t be eligible to get 95% of the total amount.
Renovations That This Loan Covers
HomeStyle Preferred Loans have fewer restrictions as compared to FHA loans. These loans allow both structural and cosmetic improvements and repairs. It means that you can borrow for renovating luxury items as well.
However, the borrower must meet eligibility requirements.
A few renovations that Fannie Mae Homestyle Loan can fund include:
- Full house remodel
- Bathroom remodel
- Kitchen remodel
- Tennis court addition
- Swimming pool addition
- Bbq area addition
- Financing on ADU
- Basement finishing
However, remember that it cannot finance in case of intentional teardown and reconstruction of a home. You cannot use these loans to add another unit to a property, meaning they cannot finance turning a one-unit property into two units.
Basic Requirements For These Loans
Individual homeowners, home buyers, and investors can be eligible for Home Style loans with a credit score of above 620. The maximum depth to income ratio needs to be 45%, and the maximum LTV should be 95% to apply for these loans. It is also important to remember that renovations must be completed within six months of loan closing.
Learn more about this loan by getting in touch with a professional advisor at Preferred Rate.