The Fannie Mae
HomeStyle Renovation Mortgage

In our current housing market the inventory of homes for sale are low, the inventory of quality homes is lower. Home buyers are finding that some housing stock needs work, improvement, or modernization, many home buyers are settling. It is a fact of the market, and will be with us for some time. Some houses need major repairs simply to bring them up to inspection and/or mortgage standards. Other homes need just a little tweaking or updating to bring them up to your standards.

In the past when a house needed some remodeling a buyer would use a home equity loan of line of credit, do the work on their own, and call it "sweat equity". But, in the current market of low inventory, sales prices pushing out any equity, there is no equity, an equity loan becomes difficult to obtain, at best.

In addition to the financing, many home buyers/owners simply do not have the time to put into fixing up a house. We all work full time jobs, have families, activities that keep us busy. Working on a house in the evening and on week-ends for many is simply too much.

Hiring a professional to remodel a home has become a much more desirable alternative. do you finance the work of a professional as well as the purchase of a new home or the refinance of an existing home? That is where a renovation mortgage becomes useful!

A renovation mortgage allows a home buyer to purchase a property and roll the cost of certain home improvements directly into the mortgage loan. This is not a second mortgage or separate line of credit.  This is one mortgage, one (low and tax deductible) interest rate and one monthly payment.

A renovation mortgage allows the home buyer to amortize the cost of renovations over the “life of the loan.” You get to spread the cost of a $20,000 kitchen remodel over your 30-year mortgage. The nice thing about doing it this way rather than a credit card or HELOC is that the work is tied to the equity of the home, so it becomes part of the future sale price if you’re considering moving someday. 

There are now three basic renovation mortgages available to home buyers and home owners, the HomeStyle Renovation Mortgage, the VA Renovation Mortgage and the FHA 203k Renovation Mortgage. Other options include Home Equity Lines of Credit, Second Mortgages, and Cash Out Refinances. 


The HomeStyle Renovation Home Loan is a financing option offered through Fannie Mae. According to Fannie Mae: The HomeStyle Renovation mortgage enables a borrower to obtain a purchase transaction mortgage or a limited cash-out refinance mortgage and receive funds to cover the costs of repairs, remodeling, renovations or energy efficient improvements to the property. The HomeStyle Renovation Mortgage provides a convenient and flexible way for borrowers considering home improvements to make repairs and renovations with a first mortgage, rather than a second mortgage, home equity line of credit, or other more costly methods of financing.

 There are no required improvements or restrictions on the types of repairs allowed or a minimum dollar amount for the repairs. Repairs or improvements, however, must be permanently affixed to the real property and add value to the property.

When HomeStyle is used for energy- related improvements, borrowers are required to obtain an energy report to identify recommended energy improvements to the property and the estimated cost savings associated with those improvements.

Essentially, HomeStyle Renovation is a solution to the current problem in housing that home buyers often see:finding houses that aren’t yet “home.” You can buy a house with potential and turn it into your home with your style, without breaking the bank. With a minimum of 3% down*, you can finance the purchase and remodeling of your dream home.

HOMESTYLE Renovation Highlights: With as little as a 5% down payment you can add your taste & style to a house to make it your home with remodeling projects like a new kitchen, bathroom, room addition or energy efficient upgrades. HomeStyle Renovation allows you to buy a home and fix it up, or refinance and remodel your current home.   
• Purchase or Refinance
• 5% Minimum Down Payment for primary, single family homes, 10% for second homes
3% Minimum Down Payment for First Time Home Buyers
• You can use gift funds for down payment and closing costs
• 3% Seller Concessions allowed
• Cosmetic and Structural renovations allowed
• Other allowable improvements can include; landscaping, appliances, in-ground swimming pools, and more 

HOMESTYLE Renovation Property Requirements: the subject property for a HomeStyle Renovation mortgage must be:
• A one to four unit principal residence
• A one unit second home
• A one unit investment property
• Manufactured homes and Co-Ops are NOT permitted

HomeStyle Renovation Borrower Requirements: borrowers need to meet the standard eligibility guidelines of a traditional Fannie Mae Conventional mortgage. Fannie Mae guidelines call for a minimum credit score 0f 620, proof of income and assets, etc. The guidelines call for a debt to income ratio, that includes the new renovation mortgage payment, of 45% of your income, exception can be made up to a 50% debt to income ratio. If you can be approved for a traditional conventional mortgage you can as well with a HomeStyle Renovation Mortgage.

HomeStyle Renovation Property Requirements: Primary Residences can be 1 to 4 unit properties, Second Homes can only be one unit properties, Investment Homes can only be a single unit property.

The appraisal report for a HomeStyle Renovation Mortgage must provide an "as completed" appraised value that estimates the value of the property after completion of the renovation work.

There are no required improvements as there may be with the FHA 203k, there are no restrictions on the types of repairs allowed or a minimum dollar amount for the repairs. Repairs or improvements must be permanently affixed to the real property and add value to the property. There is a maximum amount of repairs or improvements that is subject to 75% of the after improved appraised value.

All renovation work must be completed by a licensed, or registered, or certified contractor, not all states have contractor licensing and in those situations an exception can be made. The borrower must choose their own contractor, the lender may not choose the contractor or refer the borrower to any one specific contractor. But, if you chose an experienced renovation mortgage loan officer they should be able to refer you to multiple contractors that are experienced and knowledgeable of the HomeStyle Renovation Mortgage. 

All contractors involved in the renovation work must be approved, vetted, and validated by the lender. Having your contractor approved by the lender is a key to having a smooth renovation mortgage process and lessen the likelihood of delays. Get the Contractor Package early from your lender if you have a contractor in mind and get them approved as quickly as possible. 

Borrowers must have a construction contract with their contractor(s) one of the many reasons why there should be one General Contractor only. Fannie Mae has a model Construction Contract that can be provided to any contractor and be used between the contractor and the borrower.

Examples of What a HomeStyle Renovation Loan
Can Provide to You and Your Home:

• Structural alterations and additions
• Upgrade central air/heat
• Repair termite or moisture damage
• Remodeled kitchen and baths
• Changes to eliminate obsolescence and reduce maintenance
• Modernize plumbing, heating, AC, and electrical systems
• Install or repair well or septic systems
• Roofing, gutters, downspouts
• Flooring, tiling, and carpeting
• Energy conservation improvements
• Major landscaping
• Improvements for accessibility
• New free standing appliances
• Interior and exterior painting
• Foundation repair
• Addition of a pool (inground)

HOW TO GET STARTED: the first thing I would tell you if your are considering any renovation mortgage program is that you must do your homework first, read as much as possible, and then call me to ask all your questions and get on the right path. Having a lender that truly knows the ins and outs of all renovation mortgages is crucial to saving you from delays, headaches, and possibly much worse.

When buying a home the process should always start with a mortgage pre-qualification maybe even a pre-approval. Getting Pre-Qualified ensures that your budget and your credit are ready for a home loan. Most Lenders, myself especially, will look at your situation closely and let you know whether you qualify for a mortgage and how much you should consider in your home search.

You are now pre-qualified, the next step BEFORE you go looking for a new home is to secure an approved General Contractor. This is crucial to the process and key to making the entire home buying to mortgage application to closing on your new home flow easily and quickly. 

I recommend that you only have one General Contractor involved, the GC can have multiple sub-contractors working for them to get necessary work done. On occasion it is necessary to have multiple General Contractors but no more than two.

All General Contractors will have to go through an approval process if they are not already approved by your lender. The process ensures you have a financially stable and capable contractor working for you. Because of this and that Contractors avoid paperwork have your General Contractor chosen from the start.

NOW YOU CAN START YOUR HOME SEARCH! When you are considering purchasing a new home with a HomeStyle or FHA 203k Renovation Mortgage as you begin your search for the next new home keep in mind that if you are qualified for a set amount, say $230,000 you could actually look for homes as low as say in and around the $100,000 price range knowing you have $130,000 in renovation costs available to you. 

If you are qualified for a $200,000 sales price and find that home located in the perfect neighborhood, has the yard you want, a great school district, close to work, has the number of rooms you need, but it needs more fixing up than you would want for a move in ready house......but it is priced at $150,000. This may be the house for you because you did your homework and have $50,000 available to you to make this house your home. Through better negotiations you may have more money available to you for fixing up this home!

When you find that house, allow Me or your mortgage Lender to know about the house, show them the pictures, get them involved. Let them work up a monthly payment for you to know that you are within your budget. If this is really the house for you then make your offer! Once you are under contract the next step I recommend is holding a SUMMIT MEETING as quickly as possible at your soon to be new home.

The Summit Meeting will be held at the house you are purchasing, you will attend, your General Contractor will be there (you MUST have a General Contractor by this stage of the game), a HUD Consultant will be involved, your lender is optional to attend, I go to every one of my local Summit Meetings, and your real estate agent may want to attend.

At the Summit Meeting, introductions to all the players are made, this helps to keep all the moving parts of this process on path and moving forward. At the meeting you will be discussing the scope of work to be done to your new home and the cost of that work will develop. Since EVERYONE is there this is the perfect opportunity to ask questions, make changes, and have all the others ask questions too.

The Summit Meeting is crucial to making the process flow easily and quickly, I have been holding these meeting for years and at the rare times they are not held I have regretted that decision. Many lenders who don't do a lot of renovation mortgages do not place this extra step into the process, don't let that happen.

Once we have held the Summit Meeting the cost of your home remodeling project is determined, after you have agreed to the cost of the project, that cost is added to the sales price, less your down payment and we now have what is considered a normal mortgage application process.

As you can see there are some extra steps involve before we can move on to the mortgage application approval process. I have heard the stories told about how long other lenders have taken to complete a renovation mortgage, you may have heard them, many real estate agents have heard them and love to tell the story to their home buyers! 

I generally ask my well prepare home buyers who have done their homework, if they have an approved General Contractor onboard is key, I ask them give me about 15 extra days to make it all happen. From the time you go under contract for the new house until the day we go to closing if you and your lender (ME) have worked together you don't need to worry about closing in a timely manner, most times I will get it all done in 45 days or less.

Visit my RENO FAQ page to have all questions answered or use the form below! 

My name is Bob Rutledge and I specialize in renovation mortgages, I am a Certified Renovation Mortgage Specialist, and I close renovation mortgages every month. Most mortgage lenders cannot say that. I have the ability to close FHA 203k and HomeStyle Renovation loans all over the State of Missouri, I am also licensed to close renovation mortgages in Texas, Ohio, Florida, and Illinois.
We are licensed in 48 states and many of the United States territories. If I cannot help you with your renovation mortgage needs I can refer you to someone that I trust that can help.

If you need help with a renovation mortgage, have questions or would like to apply for a renovation mortgage please free to contact me. Email me 
or call me directly or use the form below. 

Bob Rutledge Mortgage

Loan Officer NMLS#: 297044

New American Funding 12321 Olive Blvd, ste 150
St. Louis, MO 63141