Conventional Loan Requirements
A conventional mortgage is a mortgage that’s not backed by a government entity like the Federal Housing Administration. Conforming conventional mortgages adhere to underwriting guidelines set by mortgage financing giants Fannie Mae and Freddie Mac.
Conventional loans often may offer lower interest rates than their government-insured counterparts. To qualify for one of these loans, you typically need to have good credit, a steady income, and the funds to cover a down payment. They can also be easier and faster to close than their government-backed counterparts.
Learn more about conventional mortgages and their requirements.
What Is a Conventional Mortgage?
Conventional loans include both conforming and non-conforming loans. A conforming loan is a loan that meets the guidelines of Freddie Mac and Fannie Mae. These companies are government-sponsored enterprises, which means they are private companies that were started by the government. They back mortgages to make them less risky to lenders.
Freddie Mac and Fannie Mae have guidelines for their mortgages. One of these is that the loans have limits. In most areas of the U.S., the conforming loan limit is $548,250 for 2021. Some areas have a higher cost of living, and the limit is higher in those areas. The maximum loan limit for a high-cost area is $822,375 for 2021.
Conforming mortgages can have a fixed or adjustable interest rate. A fixed interest rate means that your interest rate stays the same for the length of your mortgage. An adjustable-rate mortgage means that the interest rate can fluctuate periodically.
Conforming Conventional Loan Requirements
Fannie Mae and Freddie Mac require that all borrowers meet certain credit scores, income requirements, work history, debt to income ratios, and minimum down payments.
A few of the items that a lender will look at when considering financing include:
- Your total monthly expenses
- Your total gross income per month
- Your employment history
- Your credit score and payment history
- Your assets, including checking, savings, and retirement accounts
Your mortgage professional might require additional information after personally reviewing your application, but some basic requirements for conforming loans include:
- A minimum credit score of 620
- Total debt-to-income ratio of 45% or less
- A down payment of 3% or more
- Down payment funds should come from an allowed, documented asset source
- Some Fannie Mae and Freddie Mac loans have income limits
- You may need to have a certain amount of cash reserves depending on your credit score and debt-to-income ratio
You may need to take a homebuyer education class to qualify for a Fannie Mae or Freddie Mac mortgage.
Private Mortgage Insurance
Fannie Mae and Freddie Mac mortgages may also require you to purchase private mortgage insurance (PMI). This insurance protects the lender if you stop paying your mortgage and your home goes into foreclosure. It’s a monthly fee that’s included in your mortgage payment, and it’s typically required if you make a down payment of less than 20%.
You can cancel your mortgage insurance once you reach 20% equity in your home. Your lender must cancel your PMI when you reach 22% equity in your home or when you reach the midpoint of your loan’s payment schedule, whichever comes first.
FHA vs. Conforming Conventional Mortgages
FHA loans require that a property meet strict eligibility guidelines as far as price, location, and habitability, but conventional lenders aren’t bound by these same bureaucratic regulations.
FHA loans also have less stringent credit score requirements than conforming mortgages. You might qualify with a score as low as 500 to 580 depending on some additional factors, and you most likely won’t be hit with additional fees or higher rates because your credit score is less than average.
Conventional loans can be used to finance just about any type of property, whereas some condo complexes and certain houses aren’t approved for FHA financing.
Either mortgage option could work for many borrowers. To find out which is the best fit, contact lenders and discuss both options. They can help you determine which option is best for your financial situation and homeownership needs.
First Time Home Buyer Programs | Home Loans | Refinance
January 20, 2020 by JMcHood
Homeownership is a part of the American Dream. Everyone wants to own one, but if you have a disability, it may be harder for you to achieve that dream. While you may be able to afford a home, finding a home that’s fit to handle your disability is a whole different topic – one which many people have trouble with.
Fannie Mae, among other loan programs, has programs that help disabled individuals. The Fannie Mae HomeReady program is one that helps disabled individuals the most. The HomeReady program has flexible guidelines that make it easier for the disabled to buy a home.
What is the HomeReady Program?
The HomeReady program has more flexible guidelines than standard Fannie Mae loans. For starters, you only need a 3% down payment. Fannie Mae also allows more co-borrowers on the loan than other loan programs allow. For example, your mom or grandparent can be a co-borrower even though they don’t live with you. With any other loan program, a non-occupying co-borrower is usually a co-signer, which has different ramifications. A co-borrower makes it easier to qualify if the person has good credit and a low debt ratio.
Who is a Good Candidate for the HomeReady Loan?
The ideal candidate for the HomeReady loan is:
- Borrowers with low income (which can pertain to disabled individuals)
- Can be a first time or repeat homebuyer
- Have little money to put down on the home
- Have decent credit (at least a 620)
- Borrowers with other income, such as rental income that they need to qualify
- Borrowers that need income pooling (use income from other household members, such as grandparents or parents)
HomeReady Income Requirements
The HomeReady income requirements are as flexible as its down payment requirements. If you live in a low-income census tract, there’s no income limit. If you live in any other area, you can make as much as 100% of the area’s median income and qualify.
As we stated above, one of the largest benefits is the flexibility in the income Fannie Mae allows including:
- Rental income
- Boarder income
- Household income from people other than the borrower
- Non-occupant co-borrowers
HomeReady Debt-to-Income Ratio Requirements
Fannie Mae typically allows a maximum debt-to-income ratio of 50% for the HomeReady program. This means that all of your monthly debts, including the following can’t take up more than 50% of your gross monthly income or the gross monthly income of all parties involved:
- Principal, interest, taxes, insurance, and mortgage insurance
- Credit card payments
- Car payments
- Student loans
- Personal loans
Fannie Mae sometimes makes exceptions for higher debt ratios as well. You just need a higher credit score to make up for it. Lenders call this a compensating factor. You make up for one ‘risky factor’ such as a high debt ratio with something less risky, such as a high credit score.
The HomeReady program does have a financial education requirement you must meet. At least one borrower must go through individual homeownership counseling. The counseling must be from a HUD-approved agency. You must undergo the counseling before you sign a contract.
The counseling can work to your benefit if you need an exception made for a higher debt-to-income ratio. Lenders may be able to accept higher ratios if you can prove completion of approved counseling.
You’ll also pay mortgage insurance on the HomeReady loan if you borrow more than 80% of the home’s purchase price. The good news is, though, that you can get the insurance eliminated once you owe less than 80% of the home’s original value. This helps you lower your mortgage payment moving forward, rather than paying mortgage insurance for the life of the loan, like FHA loans require.
The HomeReady mortgage program is great for disabled buyers. If you don’t have the down payment needed for a traditional program or you have questionable credit or a high debt ratio, the HomeReady program provides alternatives that you may not get from other loan programs. You still get the satisfaction of a stable Fannie Mae loan but without the strict requirements.
Fannie Mae DUS Apartment and Multifamily Mortgage Lending Made Easy
Fannie Mae Fixed and Floating Rate Apartment Loans
When it comes to financing multifamily properties, including apartments, student housing, affordable housing, assisted living and other healthcare facilities, mobile home parks and more, Fannie Mae typically offers the most competitive fixed rate and floating rate financing, with the one exception being Freddie Mac. However prepayments can be an issue, and qualifying can be challenging, as Fannie Mae apartment loans require very experienced borrowers with strong financial statements and rigorous property underwriting. In many situations, borrowers that don’t qualify for Fannie Mae financing find that CMBS loans are a highly effective alternative.
As we mentioned previously, Fannie Mae multifamily loans are particularly well suited for affordable housing financing, and can easily fund housing affordable housing rehabilitation— especially when paired with the LIHTC (Low-Income Housing Tax Credit) program. Fannie Mae financing is also a good choice for financing properties previously under HUD legacy programs that are being converted to Section 8 housing under the Rental Assistance Demonstration (RAD) program.
Sample Fannie Mae Terms For Apartment Loans 2021
Size: Generally $1 million to $100 million
Terms: 5, 7, 10, and 12 year terms
Amortization: 30 years
Maximum LTV: 75% – 80%
Minimum DSCR: 1.25x
Recourse: Non-recourse with standard “bad boy” carve-outs
Rate Lock: 30 to 90-day commitments. An early rate lock feature is available allowing the borrower to lock a rate 45 to 180 days in advance of closing.
Prepayment Options: Yield maintenance and other graduated prepayment options are available. There is no prepayment premium if the loan is paid within the last 90 days of the loan term.
Highly competitive pricing.
Early rate lock.
Selective of the properties they will finance.
When you’re buying a home, there are multiple ways that you can go about paying for it. You can secure a mortgage by finding a bank or credit union in your area that offers home loans. There are also plenty of online lenders, like Rocket Mortgage and SoFi. You also have the option of getting a loan through a government-sponsored enterprise (GSE), such as Fannie Mae.
What Is Fannie Mae?
Chances are, this isn’t the first time you’ve come across the name Fannie Mae. When the recession hit in 2008, the government bailed out Fannie Mae along with its counterpart, Freddie Mac. Technically called the Federal National Mortgage Association, Fannie Mae exists to help make homeownership a reality for families across the country, including those that may be struggling to stay afloat financially.
In fact, Fannie Mae has been a major player in the housing market since its inception back in 1938, in the midst of the Great Depression. By the end of the first quarter of 2015, Fannie Mae had backed the financing of about 190,000 homes and backed more mortgages for single-family homes than anyone else in the secondary mortgage market.
How Fannie Mae Functions
All Fannie Mae loans actually come from outside lenders, as it’s not part of the primary mortgage market. Fannie Mae routinely buys mortgages from banks and other private lenders, puts them together and turns them into mortgage-backed securities. Then, it sells those securities to various investors worldwide.
In doing so, Fannie Mae ensures that there’s liquidity in the market, meaning that mortgages can easily be bought and sold. And it leaves private lenders with enough security to work with more borrowers.
Fannie Mae Lenders
In order to partner with Fannie Mae, lenders must go through an application process and meet certain guidelines. For instance, they must be open and honest when processing subprime loans for people with poor credit and others who fall short of income requirements.
In exchange, Fannie Mae assumes the risk attached to borrowing and protects these mortgage lenders when homeowners don’t comply with their loan terms. It does business with so many different lenders that sometimes homebuyers aren’t even aware that Fannie Mae is backing their loan.
Is Fannie Mae backing your loan? To find out, simply go to its website and use the loan lookup tool. You might come to discover that Fannie Mae is behind your mortgage. If that’s the case, you could have access to special perks, like the Home Affordable Refinance Program (HARP).
Fannie Mae Loan Requirements
Fannie Mae only deals with conforming loans for residential properties. That means it backs mortgages up to $453,100, or $679,650 if you’re buying a single-family home in a high-cost area. If your dream home requires a jumbo loan, you’ll have to look elsewhere.
To qualify for a Fannie Mae home loan, you’ll need to hunt for an approved lender and complete a uniform residential loan application. It’s a good idea to set aside some time to get all of your financial documents in order, including your bank statements and tax forms. Your mortgage lender will look at multiple factors to determine whether you’re eligible for a loan, how much money you’ll be able to borrow and what your loan rate will look like.
Securing a loan may be tough if you don’t meet the criteria. Although there are exceptions, your debt-to-income ratio typically can’t exceed 36% of your monthly income. Occasionally those with a good FICO credit score and financial reserves might get a pass. Prospective homebuyers looking for a fixed-rate mortgage will need a credit score of at least 620. A minimum score of 640 is necessary to qualify for an adjustable-rate mortgage (ARM).
Having a higher score can give you access to lower interest rates. You could also make a down payment as low as 3% if you’re buying a house for the first time. Trying to get a Fannie Mae loan with bad credit is inherently more difficult, though. You may have to go the extra mile to prove you can handle a mortgage.
If that’s your dilemma, you could apply for a mortgage backed by the Federal Housing Administration (FHA), since it tends to be less stringent with borrowers whose scores are in the 500 to 580 range. You could also highlight the fact that you’ve kept up with your rental payments, or agree to make a larger down payment to entice a lender to give you a mortgage.
If nothing else sticks with you, remember that Fannie Mae doesn’t lend any money directly to homebuyers. Instead, it acts as a bridge between lenders and consumers who can both benefit from having Fannie Mae back mortgages. From the beginning, Fannie Mae has helped make home buying more accessible and affordable for Americans.
Fannie Mae Loan for Purchase or Refinance
Fannie Mae underwriting guidelines have changed several times since student loan repayment plans became a problem after June 2015.
You may have already received conflicting information about your home loan options, or how your student loans are calculated when qualifying for a Fannie Mae mortgage. You may have been told about the 1% rule.
It is not uncommon for inexperienced loan officers to use the guidelines of one loan program, like FHA (1% rule), and incorrectly apply them to your conventional loan application.
We’re going to set the record straight today by talking about student loan guidelines when applying for a Fannie Mae conventional mortgage.
Fannie Mae Student Loan Guidelines
Fannie Mae student loan guidelines fall into two categories.
- Payment Plan (even if the income-based payment is $0)
- No Repayment Plan (deferred, forbearance)
Repayment Plan: If a monthly student loan payment is reported on the credit report, the underwriter may use that amount for qualifying purposes. If your credit report does not reflect the correct monthly payment, the underwriter may use the monthly payment that is on the student loan documentation (the most recent student loan statement).
If the credit report does not provide a monthly payment for the student loan, or if the credit report shows $0 as the monthly payment, the underwriter must determine the qualifying monthly payment using one of the options below.
If you are on an income-driven payment plan, you can provide the underwriter with student loan documentation from your servicer to verify the actual monthly payment is $0. The underwriter may then qualify you with a $0 payment.
No Repayment Plan: For deferred loans or loans in forbearance, the lender may calculate a payment equal to 1% of the outstanding student loan balance (even if this amount is lower than the actual fully amortizing payment), or a fully amortizing payment using the documented loan repayment terms.
Why Do Lenders Get it Wrong?
In our 2020 Guide to Qualifying for a Mortgage with Student Loans, you’ll read hundreds of stories from readers of this website about inexperienced loan officers and lenders that get it wrong.
By far, the single biggest mistake that inexperienced loan officers make is using FHA’s 1% rule for all student loans, all the time.
It’s heartbreaking to think that the folks that found us are just a small sample of what is probably a much bigger number of people that believed the loan officer when they said no, giving up on the dream of homeownership or a lower interest rate.
The simple fact of the matter is that there are different rules for qualifying for a mortgage with student loans depending on what kind of loan you’re applying for, and what kind of payment plan you have.
Your qualifying options are often limited to the experience of the loan officer that you’re talking to. So, the next logical question is, how do you avoid having your options limited?
If you called your lender from an online internet ad, TV or radio commercial, then you are more often than not speaking to someone in a call center with little to no actual experience looking up underwriting guidelines.
Working with an Expert
We have been helping home buyers and homeowners qualify for a mortgage with student loans since 2015 when the major challenges we face today were first introduced.
Find My Way Home is an Expert Network of experienced mortgage professionals, here to answer your questions, and put you on the right path.
You can get your questions answered by either giving us a little more information here, and we will match you with a loan officer who is an expert with student loan guidelines, or you can leave a comment or question below.
We do not sell your information to multiple lenders and hope you find someone experienced, we will introduce you to one loan officer that we know and trust that can help.
Any question that you ask below, I will personally answer, and if needed, we can introduce you to a professional, experienced loan officer that I know can help.
- What is a Fannie Mae Single Close Construction Loan?
- How Does a Fannie Mae Single Close Construction Loan Work?
- What Are the Loan Qualifications for a Fannie Mae Single Close Construction Loan?
- What Are the Benefits of a Fannie Mae Single Close Construction Loan?
- What Are the Alternatives to a Fannie Mae Single Close Construction Loan?
- What Are the Steps Involved in Applying for a Fannie Mae Single Close Construction Loan?
- Fannie Mae Single Close Construction Loan with GO Mortgage
If you’re considering building a new home, but worried about the intimidating expenses and time consumption that comes from taking out multiple loans, GO Mortgage can help. With a Fannie Mae Single Close Construction Loan, there’s no need to take out separate loans for construction and a mortgage.
Here, GO Mortgage will help you understand how this is possible and how you can qualify for a Fannie Mae Single Close Construction Loan.
What is a Fannie Mae Single Close Construction Loan?
A Fannie Mae Single Close Construction Loan is a mortgage loan insured by Fannie Mae. This type of loan is suited for newly constructed single-family homes. It combines the purchase of the property or lot with the construction of the house to deliver a myriad of benefits to borrowers.
The main differentiator of this loan, as opposed to traditional mortgages, is that this loan only requires a single closing. Borrowers can also benefit from a low down payment and competitive interest rates.
How Does a Fannie Mae Single Close Construction Loan Work?
A Fannie Mae Single Close Construction Loan is a loan that eases the difficult process of financing new home construction. When building a new single-family home, borrowers traditionally have to take out a loan for construction expenses in addition to financing the land. This process requires two separate closings, which will cost the borrower more money.
Fannie Mae Single Close Construction Loans allow the borrower to close both the construction loan and permanent financing at the same time. Once the construction process is completed, the loan will convert into a permanent loan. Fannie Mae allows borrowers to lock in interest rates prior to closing, while also allowing them to adjust to the lowest interest rate available during the construction process when converting to the permanent mortgage.
Overall, this form of loan combines the interim construction loan with the permanent financing. It eliminates the need for separate loans and closings.
A Single Close Construction Loan from Fannie Mae can ease the stress for the borrower significantly.
What Are the Loan Qualifications for a Fannie Mae Single Close Construction Loan?
In order to qualify for a Fannie Mae Single Close Construction Loan, a borrower must meet the following requirements:
- Construction to permanent transaction may not exceed 12 months
- Eligible homes include site-built single-family homes, modular, as well as manufactured home (MH)
- The borrower must use his or her own funds to make the minimum borrower contribution unless:
- The LTV or CLTV ratio is less than or equal to 80%;
- Or the borrower is purchasing a one-unit principal residence and meets the requirements to use gifts, donated grant funds, or funds received from an employer to pay for some or all of the borrower’s minimum contribution
- The borrower has a minimum credit score of 680
What Are the Benefits of a Fannie Mae Single Close Construction Loan?
A Fannie Mae Single Close Construction Loan can help borrowers everywhere significantly. From saved time to locked interest rates, Single Close Construction Loans simplify the mortgage process immensely for borrowers. Here is what a borrower can benefit from when choosing Fannie Mae Single Close Construction Loans:
- Save Time & Money
Since Fannie Mae makes single closing a possibility, borrowers only have to be present for and pay for one closing. This one closing will cover both the purchase of the lot and the construction of the new home.
- Locked-In Interest Rate
With Fannie Mae, borrowers are provided with the opportunity to lock in interest rates prior to closing. In addition to this, borrowers can also adjust their interest rates when transitioning to the permanent mortgage if interest rates drop during the construction period.
- Customized Solutions
Fannie Mae Single Close Construction Loans allows borrowers to build homes of any kind. No matter if the borrower is tearing down an old house, building new on a vacant lot, or buying a manufactured home, Fannie Mae can help.
What Are the Alternatives to a Fannie Mae Single Close Construction Loan?
A Fannie Mae Single Close Construction Loan is one of the best solutions for builders looking for an affordable way to construct a new home. If this loan is not within financial means for a builder, here are a few alternatives:
- Veterans Administration One-Time Close – available for veterans or active duty military persons that are building a new home
- Fannie Mae Home Ready Program – available for low to medium-income families looking to finance a home for as little as 3% down
These loans are affordable solutions for families looking for alternatives to Single Close Construction Loans. These are just a few alternatives, as there are plenty of loan options available for builders everywhere.
What Are the Steps Involved in Applying for a Fannie Mae Single Close Construction Loan?
When applying for a Fannie Mae Single Close Construction Loan, there are a number of steps to take in order to apply and eventually qualify for the loan. Below is how any borrower can begin the application process:
- Contact a Fannie Mae lender to get pre-approved for the loan
- A credit review will be conducted to determine your ability to repay the loan
- Make sure to check for any inaccuracies on the credit report. Rectify these inaccuracies before the credit review process takes place
- Be prepared to demonstrate proof that you either currently own or will be purchasing a lot on which your property is going to be built
- You will most likely need to have a contract with a Fannie Mae-approved builder
- A financial review will also be conducted to ensure you can meet the minimum down payment required by Fannie Mae
Fannie Mae Single Close Construction Loan with GO Mortgage
GO Mortgage is your partner for all Fannie Mae Single Close Construction Loan solutions. Our team will provide you with guidance to ensure you receive a mortgage solution that saves you time and money. There’s no need to be intimidated by a mortgage ever again with your partners at GO Mortgage. We are licensed in 35 states including a team specifically for Minnesota loans. Reach out to us today to get your Fannie Mae Single Close Construction Loan started!
The Fannie Mae HomeReady Mortgage is designed for home buyers who don’t fall into typical lending approval guidelines. If you have a low down payment, need to use income from a household member who’s not on the loan, need to have a co-signer, or need to use income from renting out a room in the home you’re buying, the HomeReady mortgage might be right for you.
Below are some frequently asked questions about how the HomeReady program works, and how you qualify.
What is the minimum down payment?
You must put at least 3 percent down if you’re buying a one-unit property, 15 percent down if you’re buying a two-unit property, or 25 percent down if you’re buying a three- or four-unit property.
What are acceptable sources of down payment and closing costs?
For the down payment, you can use gift funds or cash on hand if you’re buying a one-unit property, and none of the funds have to come from you. The eligibility of cash as a source of down payment is rare in lending guidelines, and one of the great benefits of this loan.
What kind of property can I buy?
You can buy a single-family home, condo, townhouse, or manufactured home — but if you buy a manufactured home, you must put 5 percent down. You can also buy a two- to four-unit property as long as you’re living in one of the units.
Do I have to live in the home?
Yes, you can only use HomeReady to buy an owner-occupied home. You cannot use it to buy a second home or a rental property.
Can I use HomeReady to buy a new home if I already own another home?
No. You cannot own any other home in U.S –, but you can own another commercial property in the U.S.
What kind of loans are available?
You can get 10-, 15-, 20- or 30-year fixed rate mortgages, and you can also get 5-, – and 10-year adjustable rate mortgages.
Are the rates higher than normal mortgages?
Conversely, rates are lower than other Fannie Mae conforming loans that allow such small down payments.
Will I have mortgage insurance?
Yes, if you put less than 20 percent down, you will have mortgage insurance. But the mortgage insurance fees will be slightly lower than mortgage insurance on other low-down Fannie Mae loans, and materially lower than mortgage insurance on FHA loans. The mortgage insurance goes away when you pay your loan down to 80 percent of the purchase price.
Whose income can be used to qualify?
If your income alone isn’t enough to qualify, you can add occupying or non-occupying co-borrowers to the loan. Lenders will also take into account income documentation (paystubs and W2s, for example) of people who won’t be on the loan but that will verify in writing that they’ll be living in the home with you for at least 12 months. Check with your lender on whether it formally counts this into your debt-to-income ratio calculation or if it is just using it as an added consideration (called a “compensating factor”) to help make a decision.
Can I use rental income from a room in the house to qualify?
Yes. This is another great benefit of HomeReady. It’s very rare to count income from a home you’re living in to qualify for a loan, but this program lets you do it.
What kind of credit score do I need to qualify?
You need decent credit scores to take advantage of minimum down payment options. For example, you need a 680 score if you have a debt-to-income ratio of 36 percent or less to qualify. But if your income is tighter (where your debt-to-income ratio is 36.1 percent to 45 percent), you need a 700 credit score to qualify for low-down options.
Do I have to make less than a certain amount to be eligible for HomeReady?
Your income isn’t capped when buying a property in a low-income area. Your income will be capped at 100 percent of area median income when buying a property in an area where the minority population is at least 30 percent, or where the federal government has designated a disaster area. And in areas other than these, your income will be capped below those areas’ median income levels to leave room for those who need the program the most. You can look up income limits by state maps or by ZIP code.
Are there homebuyer counseling requirements?
Yes, you must take a four- to six-hour online homeowner counseling course to qualify. After you complete your course, you have six months to submit a HomeReady mortgage application.
HomeReady has a lot of very specific borrower and property requirements. How do I find out if I qualify?
It’s true that this loan, while highly beneficial to borrowers, does have a lot of fine print for borrowers and for property locations. If you’re interested in a HomeReady loan, find a lender in your area to advise you on your specific profile.
The Fannie Mae HomeStyle program is intended for homebuyers who are interested in purchasing a home in need of moderate renovation or simply for homeowners who already own a Fannie Mae-approved home and would like to have it undergo renovations may try and qualify for additional funds through this program.
HomeStyle Loan Requirements
The HomeStyle loan program through Fannie Mae has many advantages for eligible borrowers, such as:
- Streamline, less paperwork
- 2-in-1 single loan transaction.
- Lower interest rates than the standard home improvement loan.
- Flexible mortgage term options with 15 or 30 years.
- Does not require mortgage insurance (MI) if LTV is 80% or below.
- LTV is taken into consideration after renovation is completed (great for underwater homeowners).
To find out more information on how to qualify for a Fannie Mae HomeStyle Loan, feel free to give us a call at (833) 600-0036 and one of our Fannie Mae approved mortgage professionals will be willing to answer any questions you may have.
Benefits Of Fannie Mae HomeStyle Loan
With the Fannie Mae HomeStyle loan, there are many benefits that a homebuyer can reap such as:
- Qualifying for the loan based on the as-completed value of the property.
- Many borrowers are able to take advantage of low first mortgage interest rates and are able to do numerous types of improvements or repairs in their desired home of purchase.
- Finance mortgage payments up to 6 months to cover any non-occupancy costs during construction.
- With the lender involved in the construction oversight and monitoring, it can provide added value to borrowers.
Eligible Fannie Mae Homestyle Properties
- 1-4 unit newly built or constructed (attached/detached).
- 1-unit manufactured homes.
- 1-4 unit existing site-built home (attached/detached).
- Approved (Fannie Mae-warrantable) Condominiums, Cooperative, and PUD units.
The Fannie Mae HomeStyle loan is available for purchase of primary residence, a second home, or investment property.
*Important:Manufactured homes must be newly purchased and never previously attached to a foundation, and must meet all requirements of Fannie Mae HomeStyle.
Down Payment Requirement
Down payment for Fannie Mae’s HomeStyle program is as low as 3% , but is usually 20% required if you choose to not have mortgage insurance.
Loan-to-Value (LTV) Requirement
The LTV required for a HomeStyle loan is up to 95% for primary residences, up to 90% for second home and up to 75% for investment properties.
Debt-to-Income (DTI) Ratio Requirement
Typically, for a Fannie Mae HomeStyle loan, a borrower must not exceed 45% DTI.
Minimum Credit Score
With a LTV greater than 80%, a 700 minimum credit score is required. If the LTV is less than or equal to 80%, a credit score of 680 minimum is required primary residences and second homes.
Please keep in mind that all renovation work must be completed by a licensed contractor, although Fannie Mae does allow for a “Do It Yourself” (DIY) renovation option as long as the buyer receives lender approval for this option and a 10% contingency reserve of the renovation amount is required as well.
A contingency reserve is an amount of money established from a retained earnings to allow for unforeseen losses or damages during the renovation process.
Let’s Talk About Renovation Lending Options
Talk with a licensed renovation lender to see what your scenario or property may be eligible for.