FHA 203(k) vs. Fannie Mae Homestyle Renovation Loan

[Brad Roche]

Fannie Mae Homestyle Renovation Loan vs. FHA 203(k)

The FHA 203(k) is the most widely known renovation loan, but did you know about the Fannie Mae Homestyle Loan?

Here's how they break down:

Fannie Mae Homestyle

• Minimum Down Payment: 3%-5% (Primary Residence) & 20% Down (Investment/Second Home)
• Credit Score: 620
• Minimum Loan Amount: $50,000
• Maximum Loan Amount: Per County Loan Limits
• Occupancy Types: Primary Residence, Second Homes, and Investment Properties
• Unit Maximum: 4 Units
• Acceptable Renovations:
  • -Structural Improvements (e.g., new roofing, foundation repairs)
  • -Cosmetic Enhancements (e.g., new flooring, updated bathroom/kitchen fixtures)
  • -Energy Efficiency Upgrades (e.g., solar panels)
  • -Accessibility Modifications (e.g., ramps, widened doorways)
  • -Luxury Items (e.g., pool)
  • -Landscaping
• Not Acceptable Renovations:
  • -Commercial Use (e.g., turning a residential property into a commercial property)
  • -Temporary Structures
  • -Non-Residential Buildings (e.g., barns, stables)

FHA 203(k)

• Minimum Down Payment: 3.5%
• Minimum Credit Score: 620
• Minimum Loan Amount: $50,000
• Maximum Loan Amount: $524,225
• Occupancy Types: Primary Residence ONLY
• Unit Maximum: 4 Units
• Acceptable Renovations:
  • -Structural Improvements/Reconstruction (e.g., adding rooms, bathrooms)
  • -Cosmetic Enhancements
  • -Eliminate Health and Safety Hazards
  • -Energy Efficiency Improvements
  • -Major Landscaping (e.g., grading, tree removal, adding walkways)
• Non-Acceptable Renovations:
  • -Luxury Items
  • -Commercial Use
  • -Temporary Structures
  • -Non-Residential Buildings

Both of these renovation loans are similar in many ways, but the key differences are:

• 1. FHA only allows for primary residence occupancy types, whereas Fannie Mae allows for investment properties and second homes.
• 2. FHA does not allow for luxury items like adding pools or outdoor kitchens. Fannie Mae offers much more flexibility regarding the types of renovations you can and cannot do.
• 3. Fannie Mae allows for higher loan amounts and larger renovations (up to $806,500 in most states). While FHA's max loan limit is $525,225

Please comment any questions or if I missed anything!

[Jeffrey Blackman]

Hey @Brad Roche,

This is great information to get out there! You've done a terrific job of detailing the components of each program. There's also the conventional loan program CHOICERenovation by Freddie Mac. It's very similar to the Fannie Mae Homestyle program you discuss. Like you, when I'm working with clients I highlight the key advantages of the conventional rehab loans (Fannie Mae's Homestyle and Freddie Mac's CHOICERenovation) are:

• - They can be used for investment properties
• - You can include luxury items
• - They have a higher limit – $806,500 in most places.

Jeff