HomeStyle Renovation Mortgage LoansThe Fannie Mae HomeStyle Renovation Loan is a mythical mortgage product that only exists in the hopeful minds potential home-buyers and mortgage lenders. 95% of the customers searching for this niche renovation product probably end their search believing the statement above to be true.They have called lender after lender and none offered the product with the majority not knowing it exists or confusing it with the HomePATH
The HomeSTYLE and the HomePATH are both Fannie Mae offerings, but they are different beasts with different guidelines, different rates and different levels of availability in the market.
Many customers looking for the HomeStyle loan end up having their lender steer them into the more readily available FHA 203K renovation loan. While it may do the trick for many renovation loan seeking customers there are some gaps and guidelines that may prevent a home from qualifying for 203k loan. However, that home may be eligible for the HomeStyle.
In addition to property eligibility differences, in some cases going the FHA route is simply not the best path for the customer.
Let's look at a few of the guideline issues and overall borrower benefit issues that make the HomeStyle preferable to a 203K loan, as well as some situations where it is your only renovation loan option.
HomeStyle Renovation BenefitsHigher Loan Amounts Allowed - The Homestyle is a conventional Fannie Mae mortgage loan. In most places that means the loan limits in most places are $417,000. FHA typically provides lower loan limits. In Atlanta, for example, the max FHA loan is $346,250. In other parts of Georgia, as well as Alabama, Tennessee and parts of Florida, the max FHA loan is $271,000.
Expanded Occupancy - The Homestyle is available for 2nd homes and investors. FHA mortgages are for owner occupants / primary residency only
Mortgage Insurance - This one is a biggie. FHA loans have PMI regardless of your down payment. Even with 20% down you still have mortgage insurance on a FHA 203K. Unless your refinance, that MI is there for 5 years minimum.
The Homestyle, like other conventional loans, have mortgage insurance that reduces with down payment and disappears at 20% down. Take a look at these numbers.
FHA 203K Loan - $346,250 x 1.25% annual mortgage insurance = $4,328 ANNUAL ($360 / month) x 5 Years = $21,640 in Mortgage Insurance.If you can afford 20% down then choosing the HomeStyle over a FHA 203K will save you $21,640 based on the scenario above.
Expanded Repair Scope - The Homestyle is not restricted on scope of work. There are repairs that the 203K won't allow that you can include on with a HomeStyle renovation. Things like swimming pools, landscaping and even luxury items like a sauna or Jacuzzi are allowable.
Let me digress for a second and discuss swimming pools. It gets hot in the South. Lots of homes have a pool. If the home was foreclosed on and vacant then the pool is probably full of rancid brownish water. There's a pretty good chance that the previous owner, who couldn't afford their mortgage payment, also couldn't afford the pool upkeep either. You may have a torn liner, a broken pump or other issues. If you were planning to purchase that home with a 203k Streamline then you have a problem. NO pool repair allowed on a 203k Streamline and a $1500 cap on the Consultant 203K. Pretty good chance that the appraiser will classify the pool as a health and safety issue and kill your FHA loan. This is not a problem with a HomeStyle Renovation!
Unfinished Builder Foreclosures - With a FHA loan the home MUST have a Certificate of Occupancy (C.O) at one point to qualify. That eliminates foreclosures where the builder bailed was foreclosure before he finished the house. The HomeStyle loan will allow you to buy and finish these properties.
ConclusionThere are situations where the HomeStyle Renovation is the only choice and others where it is simply a BETTER choice than other renovation mortgage products on the market.
If you plan on taking the purchase and renovate path (it's a helluva plan) then you need to hook up with a renovation lender that offers the full spectrum of renovation products - the HomeStyle, the HomePath and the 203K - to ensure you get the right loan for you.
Still not sure? Want to see some numbers or get some questions answered? Contact Us! We get paid to answer questions and we offer all of the renovation products on the market. Simply complete the contact form on the right so we can get you to the right person.
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