Fannie Mae Homestyle loans are the type of renovation loans or rehab loan. It enable the home buyers to borrow both the purchase price of the potential home and renovation costs and combine into one mortgage loan amount.
It is one of the great ADU Grants for home buyers and home owners to roll the cost of renovating a fixed upper home into one loan. The Homestyle loan program is more complicated than the traditional home loan.
How the Fannie Mae renovation loan works?
The basic procedure of getting home loan is the same as getting any other type of loan. The borrower will need to apply for a home loan and meet the basic income, credit and qualifying guidelines. Here are the steps the borrower will need to take to be approved for a homestyle loan
- Choose a qualified contractor to complete the project. Licensing contractor is required of your state requires it.
- The lender needs to approve a signed work contract with your contractor that details the project scope, date of completion and costs of each phase.
- It is important to disclose DIY work. If you are contributing your skills to renovation work, an approval letter from the lender is required for the work you will be doing. No more than 10% of as completed value can go towards Do it yourself work.
- Decide how much amount is required for reserves. Renovation loans require two kinds of reserves to help cover unexpected costs outside of your original construction budget- contingency reserves and payment reserves.
Fannie Mae Homestyle renovation loan requirements
- Credit score of at least 620 and debt to income ratios 45%
- You can avail loan for one-to-four unit primary home, condo or co-op planned unit development or manufactured home.
- Renovations must be completed within a year from the date your loan closes.
When you are ready to renovate your house or build ADU, Fannie Mae Homestyle Loan lets you buy and renovate or refinance your current home and include money for home improvement projects.