Home Style Renovation Loans - Fannie Mae Vs FHA 203k Renovation

A great program that is lesser known is the HS program or home style renovation loan from Fannie Mae.

It is similar to FHA's 203k renovation product in that it allows a borrower to finance both the purchase cost, rehab cost, and some carrying costs into the new loan.

The rehab must be able to be finished within the subsequent 6 months after loan closing.

Unlike the 203k the HS program does not require the borrower to have 2.25% min equity in "as is," condition so as long as the new loan fits within the LTV (loan to value) parameters for HS.

HS can finance primary residences, second homes, and investment properties as opposed to only primary residences with FHA 203k. 

HS can only finance 1 unit second homes and investment properties. So if you have 2-4 unit properties you'll need a different product like community bank money, portfolio, or hard money to provide the bridge financing to get your construction/rehab done before you can refinance the outstanding debt back into a permanent product like a 30 year fixed.

HS has less restrictions on what you can include in your renovation unlike 203k which has more restrictions.

203k FHA has a lower note rate but generally has .80-.85% annual mortgage insurance plus a large upfront MI premium that is 1.75% of the loan amount so all in all the HS program may be a lot less expensive depending on the scenario of the borrower.

Both Home Style Renovation and FHA 203k can be used for 2-4 unit properties when its a primary residence.

HS financing program can be designed to have low to no mortgage insurance if the ending loan will be at 80% or lower LTV based on the future or after repair appraisal.

Hope this helps.