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Fannie Mae Homestyle Rehab Mortgage

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commercial-construction-loansProduct Types

10- 30 year fixed


HomeStyle enables homebuyers and homeowners to finance either the purchase or a refinance of a house and the cost of its rehabilitation through a single mortgage.  The extent of the rehabilitation may range from relatively minor to virtual reconstruction provided the existing foundation systems remain in place.  The loan is fully disbursed at closing, all monies for repairs are placed in escrow and the borrower pays full principal and interest throughout rehabilitation.  Loans in which the borrower makes the repairs (aka “Self Help”) are not permitted.

Eligible and Ineligible Properties and Programs

Refer to FNMA Standard product.  In addition, the following also applies:

  • Condominiums and PUD’s must be FNMA eligible
  • For condominiums, interior rehabilitation is permitted only (no common areas). Must be FNMA eligible.
    • New construction is not allowed. The borrower must have a certificate of occupancy for a minimum of one year.
    • EEM (Energy Efficient Mortgages) are not permitted.
    • Refer to FNMA Standard Product
    • High Balance loans are not permitted
  • Multi-family conversions are not eligible for increase or decrease in unit count.
  • Cooperatives and 2-4 unit Investment properties are not eligible.
  • Mixed-use properties are not eligible.

Maximum Loan Amount

  • Conforming only
  • High Balance loans are not permitted





Contractor Acceptance

Contractor acceptance is required for all transactions, both Standard and Streamlines.All rehab work must be performed by a qualified and licensed contractor chosen by the borrower and completed in a workmanlike manner.

  • Borrower is limited to a total of 3 sub-contractors or a General Contractor will be required.
  • The borrower may not act as the General Contractor.  “Self-Help” loans are not permitted.
  • Contractor’s Resume, should be completed by all contractors.
  • The Underwriter must validate the Contractor(s) selected by the borrowers are acceptable to lender. A Contractor Acceptance Checklist ( Exhibit 03-099C) must be completed.
    • A Homeowner-Contractor Agreement is required for each contractor (Form 2101).


Renovation Term

6 months.

Repair Estimates

Borrowers must provide written contractor estimates for all work being included in their repair escrow.

  • Estimates should include the cost for labor & materials.
  • Estimates must itemize all work being included.
  • All estimate amounts must match the Homeowner/Contractor Agreement(s), Form 2101.
  • Materials or appliance estimates from “box stores” (i.e. Home Depot, Lowe’s, etc.) must be accompanied by labor estimates from the installing contractor who will install the materials.

– Whether the installing contractor is independent OR a sub-contractor for a store, they must still provide an executed Homeowner/Contractor agreement, and be “Accepted” by lender.

– Exception: free-standing appliances (or items that do not require installation or labor to install) may be presented as stand-alone estimates (i.e. free-standing stove, washer, dryer).

  • Paint must always be accompanied by a labor estimate.
  • A structural repair is defined as any change to the foundational footprint of the home, any foundation repairs requiring excavating work, any alteration of the sizes of windows or doors, or changes to the home’s interior layout.  While the foundation may be added to, the original foundation must stay intact.

Underwriting Considerations

All loans must be underwritten according to general FNMA guidelines and Chapter VII, Section 116 unless otherwise noted.

  • Appraisal Requirements:

– Any appraisals made “subject to repairs” will require a final inspection.

– PIW “No Appraisal Option” – Not Allowed.

– Full appraisals are required.

– Inspectors can be FHA approved or provide equivalent qualifications as established by M&T.

– Appraiser must acknowledge review of work being done.

  • The maximum loan amount includes any financed rehabilitation amount.
  • Loan Decisioning
    • DU Approve only
    • Desktop Underwriter cannot differentiate between the true renovation costs (repairs only) versus the total amount (including reserves, fees, etc). Should DU return an ‘Ineligible’ due only to the percentage of renovation being greater than 50%, you may proceed and a single loan waiver is not required in these instances.
  •  Maximum Number of Financed Properties: When the subject property is a second home or non-owner occupied, the maximum number of financed properties the borrower(s) may have outstanding is 4.  (This limitation is based on the total number of properties financed, not just the number of FNMA mortgages).


    Not permitted.

    Disclosure / Prior-to Settlement Requirements

    Use standard documents unless otherwise noted.

    • Pre-application
    • Origination Documentation
      • HomeStyle® Renovation Maximum Mortgage Worksheet – (Form 2609)
      • HomeStyle®Borrower’s Acknowledgement – (Form 2600)
      • HomeStyle® Renovation Consumer Tips – (Form2602)

    Mortgage Insurance

  • Mortgage insurance is required for all loans with LTV’s in excess of 80%.

– MI is based on the as completed value.

– Standard FNMA coverage is required to be effective as of the date of closing.



  • Financed MI Option
  • Owner-Occupied only.
  • MI may be financed if the base LTV is 90% or less.

– Determine the coverage required prior to adding the MI to the principal balance.

– Maximum LTV for the product is calculated using the base loan amount before MI cannot exceed 95%.

Prepayment Penalty


Pricing and Rate Locks

Call For Pricing.

Settlement Instruments & Documents

  • Notes:
  • Monthly – FNMA/FHLMC 3200 Fixed Rate Note Series or VMP005N Series
    • Riders:
      • Standard FNMA /FHLMC – 1-4 Family, Second Homes, Condominium & PUD
      • Rehabilitation Loan Rider –  Form MT4038
      • NYS ONLY: Section 22 Affidavit and Notice of Lending
        • Security Instruments:
          • FNMA /FHLMC 3000 Series or VMP Series VMP006A.
  • NY CEMA – is permitted

Temporary Buydowns

Not permitted.

Product Description and Product Code

Product Description                                                             Product Code

FNMA HomeStyle 15 Year Fixed 102
FNMA HomeStyle  20 Year Fixed 004
FNMA HomeStyle  30 Year Fixed 103
FNMA Streamline HomeStyle 15 Year Fixed 118
FNMA Streamline HomeStyle 20 Year Fixed 119
FNMA Streamline HomeStyle 30 Year Fixed 120



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