Fannie Mae Home Improvement Loans

Fannie Mae Home Improvement Loans

Fannie Mae Home Improvement Loan

Fannie Mae HomeStyle Home Improvement Loans are mortgage loans created specifically to help homeowners finance project such as completing additions, repairs, and renovations on their homes. For these renovation mortgages, the renovation costs cannot exceed more than 50% of the total loan amount, all work must be completed by a licensed contractor, and the loan total cannot surpass the current Fannie Mae limit of $471,000.

This style of Fannie Mae loan is available for homestyle renovations on the purchase of investment properties, second homes, and primary residences. Certain Fannie Mae warrantable coops, PUD units, and condos are also available. Check with your lender to be sure any of these types of properties qualify for this renovating loan program.

Additional Benefits With a Fannie Mae HomeStyle Home Improvement Loan

  • Covers both structural and cosmetic renovations
  • Offers 15 or 30-year flexible terms
  • Will cover monthly payments for up to six months of non-residency due to renovations
  • Available for a refinance of existing properties
  • Provides peace of mind with lender oversight and monitoring of construction and renovations

Down Payment Requirements

Down payments can be as low as 3% of the total FHA loan amount. But if you want to avoid monthly mortgage insurance, a minimum of 20% down is required. 

Loan-to-Value Requirements

The loan-to-value value ratio (LTV) is the comparison between the desired loan amount and the appraised value of the home, which lenders use to determine maximum loan amounts. Fannie Mae allows the following LTV amounts:

  • 95% for a primary residence
  • 90% for a second home
  • 75% for an investment property

Debt-to-Income Ratio (DTI) Requirements 

The debt-to-income ratio is a comparison of a person’s gross income, what they make before taxes are taken out, and the total amount of listed liabilities. Debts considered in this ratio are other mortgages, car loans, and credit card expenses, among others. The DTI in this program can be no higher than 45%.

Minimum Credit Score

Loans for the purchase of a primary residence or second home, which have an LTV of greater than 80% require a minimum credit score of 700, while loans with a lower LTV can be accepted with a score of 680.

Mortgages for the purchase of an investment property require a minimum credit score of 720 for salaried individuals and 680 for those who work on commission or are self-employed.

To see if you qualify for a Fannie Mae Homestyle Home Improvement Loan, contact a Mortgage Advisor today.