Fannie Mae Rehab Loan? For those who do not know about the Fannie Mae Rehab loan it may be because you have heard it called by a different name, the HomeStyle Loan. It may be because you have just started looking into buying your first house and you have become overwhelmed with all the “things” in the process, too. Regardless of whether you’ve heard of it or not, I am going to breakdown the Fannie Mae Rehab Loan AKA the HomeStyle Loan so you have a little more insight into what it is and to determine if it’s the right path for you.

The Fannie Mae Renovation Loan, Rehab Loan, HomeStyle Loan or whatever you’d like to call it, is a conventional loan that allows you to borrow the purchase costs along with the renovation costs wrapped up into 1 loan. This simplifies the process because you only have to secure financing from 1 place for 2 separate pieces to the real estate puzzle. It also lightens the load on your pockets because you avoid paying closing costs on 2 separate loans as well as only paying interest on 1 loan as compared to two. You can borrow up to 105% of the ARV (After Repair Value). Watch the Video For further explanation.

After the loan has been approved:

• up to 50% of the funds can be released to vendors to pay for materials, designer or architecture fees, or any other upfront costs

• The funds must go directly to the vendors and not to the homeowner.

• The remainder of the funds will be released upon completion and inspection by a qualified professional

• This loan does allow for the DIY homeowner to pitch in

• Homeowner can DIY up to 10% of the total project and this portion must also be inspected and approved upon completion

Pros:

1. Bundle purchase and renovation costs into 1 loan

2. You can cancel mortgage insurance once you have over 20% Equity in the property

3. Can be used on ANY type of property including vacation homes and investment properties

4. Can be used on ANY type of renovation including luxury upgrades

Cons:

1. Can’t be used to tear down and reconstruct. Has to be used to renovate an existing property

2. More strict with qualifying standards on credit score & debt-to-income ratio

3. Must submit a construction plan for approval before you can close on the loan

4. Added steps delays the closing process timeframe. It takes longer to close compared to traditional mortgage loans

If you have questions or need some assistance, hit me up!