Fannie Mae construction loans act as an alternative to FHA loans for borrowers, and they include several attractive features. With a Fannie Mae Homestyle® Renovation mortgage, you’ll either be purchasing a home that you want to renovate, or refinancing your current home to include renovation expenses. If you’re looking to upgrade a certain area in your home or finance small projects, this is the perfect choice. However, there are some additional things you should know before you come to a decision.
1. You Need a Good Credit Score
For Fannie Mae Homestyle® construction loans, you need a credit score of at least 620 to qualify. However, this is only true if you plan to purchase and put down 25% on a one-unit home with a debt-to-income ratio of 36% or less. In addition, you must have 2 months of cash reserves on hand. It is much more ideal to have a score of 680 or higher. The better your credit score is, the easier it will be to qualify. If you have a high debt-to-income ratio or you’d prefer to make a less costly down payment, having a higher credit score will be necessary.
2. You Can Use the Funds for Almost Any Construction Project
The best thing about Fannie Mae Homestyle® construction loans is how flexible they are. Do you want to install a new pool in your backyard? What about a sun-room? Are you interested in renovating your kitchen or bathroom? You can do all of these with a Fannie Mae loan. While you can’t get cash back with this option, you can incorporate closing costs, labor expenses, materials, permit fees and more. You can even use this type of loan for DIY work on one-unit residences. The only thing you can’t do is completely tear down a home and reconstruct it. In that scenario, you’d want to choose an FHA loan.
3. Down Payment Requirements
In order to qualify, you’ll need to put down at least 5% for a single-family unit. If you are eligible for the HomeReady program as a low-income borrower, however, only 3% is required. Another thing to note is this: the value of your home post-renovation will determine your down payment. If you’re buying a home, for example, your down payment will include a percentage of the cost, plus renovation expenses. Can’t meet the down payment requirements? Don’t worry. You may be able to receive further assistance from government programs or non-profit organizations. Luckily, there are always plenty of options to explore when it comes to construction loans.
4. What Property Types are Eligible
Before selecting a Fannie Mae Homestyle® loan, it’s important to know that only specific property types are eligible:
- One-unit second homes
- One-unit manufactured homes
- One-unit investment homes
- Co-op units
- Single-family detached homes
- Duplex, triplex, and quadruplex homes
How Golden Lenders Can Help with your Fannie May Construction Loan
Are you in need of construction loans? Golden Lenders helps home buyers in Colorado, Florida, California understand the different types of mortgages that are available and provides loans to help people achieve the dream of homeownership. Since the specifics of which mortgage to choose is dependent on a variety of factors, we encourage you to call us for more information and find out which is right for you. Need more info about appraisal and inspection? Call us! Our number is (303) 482-2361, or you can send us a message.