Modern mortgage programs make it easier than ever for borrowers to purchase and finance a home renovation with one single loan. Both Fannie Mae’s HomeStyle mortgage and the FHA’s 203K mortgage serve as “one-time-close” mortgages with distinct similarities and differences that can make choosing between the two difficult to decide.
“Fannie Mae’s HomeStyle loan is one that many buyers and most Realtors, may not have heard of,” says Perry Farella, writer of the blog “Rehab Dollars & Sense,” and loan officer with AmeriFirst Home Mortgage. “It is a conventional renovation loan that can be used at purchase time or as a refinance loan for those wanting to update a home they already own.”
Offering a higher loan limit than most FHA loans, homebuyers and investors can use HomeStyle to purchase a one-unit dwelling, such as a condo or single-family home, renovate it and then rent it out or flip for a profit. For owners who will occupy a HomeStyle loan may be used for 1 to 4 unit properties. “HomeStyle is designed to allow investors to participate in renovation lending versus FHA 203K, which is only for those that will actually live in the property,” he says. Buyers and investors can also use the loan to purchase and renovate vacation homes that can then be rented out for a portion of the year with a 10% down payment.
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