Fannie Mae HomeStyle Mortgage

Fannie Mae HomeStyle Mortgage Guidelines For 2020

Gustan Cho Associates are mortgage brokers licensed in 48 states

This ARTICLE On Fannie Mae HomeStyle Mortgage Guidelines For 2020 Was PUBLISHED On January 16th, 2020

What are Fannie Mae HomeStyle Mortgage Guidelines for 2020

Have you thought about adding a pool to your property? Or how about redoing your kitchen or bathrooms?

  • Fannie Mae has made some important changes to the renovation mortgage product
  • They now allow the addition of an inground swimming pool when utilizing the HOMESTYLE program
  • If you are not familiar with Fannie Mae’s homestyle mortgage product, we will go over some important details in this blog, we will also go over how to apply for a renovation mortgage with Gustan Cho Associates

In this article, we will cover and discuss Fannie Mae HomeStyle Mortgage Guidelines For 2020.

What Is Fannie Mae HomeStyle Mortgage

Fannie Mae created their homestyle mortgage product many years ago.

  • This program came out to compete with renovation loans such as the FHA 203K and VA RENOVATION LOAN
  • This is a conventional loan option that is a key tool used for renovating homes across the nation
  • In most parts of our country, a conventional mortgage has a higher loan limit compared to FHA mortgages
  • This allows more space for renovations

This Fannie Mae loan product also allows renovations at the FHA 203K product will not allow, such as a swimming pool.

Fannie Mae HomeStyle Mortgage Guidelines For 2020 On Conventional Loans

Fannie Mae Homestyle uses conventional guidelines for qualification purposes. Please see our blog on QUALIFYING FOR A CONVENTIONAL MORTGAGE for more information. Assuming you qualify for a conventional mortgage, the Homestyle renovation loan is a great opportunity to make your current house or the home you are buying your dream home.

Bullet Points Of Homestyle Mortgages

What are mortgage bullets?

Below are some details about the loan product.

  • A renovation mortgage will use the “ARV” or “after repair value” for the loan terms
  • Your down payment will be based on purchase price PLUS the renovation costs the renovations may not exceed 75% of the “as-completed value” for a purchase or a refinance transaction
  • This gives you quite a bit of room for renovations
  • Many clients ask if they are able to work on the property themselves
  • There is a “do-it-yourself” option
  • However, the lender must approve and review the renovations in advance
  • The “do-it-yourself” renovations may not represent more than 10% of the projects
  • Meaning you can do some work yourself, but the majority must be done by a licensed and insured contractor

Keep in mind, an inspection must be completed for any “do-it-yourself” repairs totaling more than $5,000.

Using General Contractor

When utilizing a contractor, 50% of the funds can be released to cover materials, architect fees, and permits. The remainder of the funds will not be distributed until a completed inspection is approved. It is important to have this conversation with your contractor to make sure the scope of work fits in their budget.

Benefits Of HomeStyle Renovation Loans

Pros to Homestyle:

  • The ability to put home payment and upgrades into one monthly payment
  • Mortgage insurance that eventually goes away
  • You will have mortgage insurance when putting less than 20% down however unlike FHA mortgage insurance, this is cancelable once your loan-to-value reaches 80%
  • You can finance up to six mortgage payments within your loan amount
  • This will give at least six months to start the work before you are obligated to make a mortgage payment
  • Homestyle is available for second homes and investment properties unlike FHA 203k mortgages
  • Luxury items are allowed, such as swimming pools, hot tubs, and saunas

Cons Of HomeStyle Mortgages

What are the disadvantages of HomeStyle mortgages

CONS for Homestyle:

  • Time to complete the mortgage. Since there are extra steps for the renovations, these transactions typically take a minimum of 45 days and an average of 60 days
  • You must submit a construction plan with licensed contractors before you receive a clear to close
  • These plans must be satisfactory with specific underwriting requirements
  • Stricter qualifications compared to the FHA 203k product (in general, conventional guidelines are stricter than FHA)
  • Homestyle cannot be used to tear down and reconstruct a property
  • You may only renovate pre-existing properties

Fannie Mae has a form that must be signed preparing borrowers for the renovation loan. Here is the CONSUMER TIP FORM

Some key things to look out for are:

  • Any overages in the renovation escrow account will be applied to the principal balance of your mortgage
  • When selecting a contractor, it is important to research their licensing and financial background
  • It is important to ask for references
  • It is your responsibility to negotiate any agreements and or warranties with your contractor
  • The lender will not provide any warranties
  • As mentioned above, you may finance up to six mortgage payments within the renovation mortgage
  • However, after that, you are responsible to make your mortgage payment even if the work is not completed
  • Plan timeframes accordingly with your contractor
  • It is important not to approve funds being released if you are not satisfied with the work
  • Do not pay any contractor out of your own pocket, the funds must come from the renovation escrow account.

Once Renovations are completed, the appraiser is required to inspect the home and issue a final appraisal.

Applying For Fannie Mae HomeStyle Mortgage

Applying for a renovation mortgage with Gustan Cho Associates is simple. The first steps of the process are the same as a non-renovation mortgage. You will first gather the required documentation. See below:


  • Last 60 Days Bank Statements – to source down payment
  • Last 30 Days Pay Stubs
  • Last Two Years W2’S
  • Last Two Years Tax Returns
  • Driver’s License
  • Contact Information for Contractor


  • Driver’s License
  • Last 30 Days of Pay Stubs
  • Last Two Years Tax Returns
  • Last Two Years W2
  • Current Mortgage Statement
  • Homeowners insurance Policy
  • Contact Information for Contractor

Once you have obtained the required documentation, please call Mike Gracz on 630-659-7644. Mike will briefly go over your renovation needs and pair you with a licensed loan officer in your state. Your licensed loan officer will send you an application link, which gives them permission to start your loan file. Once they obtain a copy of your credit report, they will know the next steps in the process. Assuming you qualify for a renovation mortgage, you will first need to select the property before working with a licensed contractor. When completing a renovation mortgage with Gustan Cho Associates, you will have a designated renovation team member on your side to help coordinate the improvements with the contractor. Depending on the financial situation of your contractor, they may need to collect money throughout the process to complete the renovations. This is why you have a designated renovation team member assigned to your file. These mortgages can be tricky when utilizing a team that is not experienced. We encourage you to call him today with any questions.

Qualifying For A HomeStyle Mortgage With An Experienced Lender

We have offered renovation mortgages for a long time. However, recently, they have become more popular. Many families are choosing to stay in their existing homes versus moving. This could be for a wide range of reasons, but many feel it is because of the rising home values. A couple of small renovations can give your home to face live it needs and create extraordinary value. According to FHFA, home values across the nation are rising. The home price index rose about 5.38% from 2018 to 2019. This number can be even higher if you complete renovations to your property. Many families are staying in their house for other reasons such as keeping their kids in the same school district. Whether you are moving or staying, a renovation mortgage can help you tremendously.

For any general mortgage questions or questions about renovation mortgages, please contact us at Gustan Cho Associates today. We are available seven days a week to help you with your mortgage needs. We look forward to hearing from you.