The HomeStyle® Renovation (HSR) Mortgage permits borrowers to include financing for home improvements in a purchase or refinance transaction on existing homes. The HSR Mortgage provides a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 75 percent of the as-completed appraised value of the property with a first mortgage, rather than a second mortgage, home equity line of credit, or another more costly financing method. Eligible borrowers include individual home buyers, investors, nonprofit organizations, and local government agencies. Homes at various levels of quality, including less expensive “starter homes,” help low- and moderate-income households become homeowners and start building equity.
The HomeStyle® Renovation program is built for:
- FICO Scores 620+
- All Borrower types
- Fee simple ownership, no land leases
- The borrower may not receive cashback at closing in any amount.
- Project Completion with 12 months of the closing date
- The cost of renovations is limited to 75 percent of the property’s as-completed value except manufactured.
- The property may be: 1-4 unit primary residence- maximum allowable LTV is 97 percent for a one-unit primary residence unless combined with HomeReady. A combined LTV of up to 105 percent is allowed with a Community Seconds®18 mortgages for purchase transactions.
- Manufactured housing is allowed, but the repairs, renovations, or improvements capped at 50 percent of the as-completed appraised value.
- 1-unit second home
- 1-unit investment property
- Condominium or co-op projects with renovation plans must be permissible under the homeowners’ bylaws’ association and obtain written approval interior limitation for the renovations.
- The lender must review the contractor hired by the borrower to determine if they are adequately qualified and experienced to perform the work.
- The Contractor Profile Report (Form 1202- found below) assists the lender in making this determination.
- Borrowers must have a construction contract with their contractors. Fannie Mae has a model Construction Contract (Form 3734- found below) to document the construction contract between the borrower and the contractor.
- Plans and specifications must be prepared by a registered, licensed, or certified general contractor, renovation consultant, or architect. The plans and specifications should comprehensively describe all work to be done and indicate when various jobs or completion stages will be scheduled (including both the start and job completion dates).
- One-unit owner-occupied homes, borrowers may perform repairs themselves, but these repairs’ financing may not exceed 10 percent of the as-completed value.
- Inspections are required for all work items that cost more than $5,000.