A complete guide to the Fannie Mae HomeStyle loans for renovations

Are you just beginning your home search? Or are you a little further on your homeownership path and plan to refinance and remodel your current home? A HomeStyle Renovation loan may be the ticket to remodeling and buying your fixer-upper (or a home that just needs a little TLC).

Unlike building a brand-new home from the ground up (as with construction loans, which requires two loans – one for the construction and another for the mortgage to pay for the newly constructed home), a Fannie Mae HomeStyle loan allows you to buy and renovate with one loan. In short, you pay off the renovation through your monthly mortgage payments. 

Though Rocket Mortgage doesn’t offer renovation mortgages at this time, it’s still a great idea to understand all your options. Read on to learn more about how a HomeStyle loan can help your home look exactly like you envision.

How does a Fannie Mae HomeStyle loan work?

First, it’s important to understand that Fannie Mae doesn’t directly lend home buyers money, though it’s easy to make that leap. Fannie Mae is a government-sponsored enterprise that purchases mortgages from lenders and bundles them into mortgage-backed securities (MBS), which Fannie Mae then sells to investors. This gets debt off their books and frees up lenders to make mortgages for other home buyers. Fannie Mae also helps lessen risk to banks so those with low income or poor credit scores can purchase homes.

The Fannie Mae HomeStyle loan differs from one of the most common types of mortgages: conventional mortgages. Conventional mortgages are a type of loan not insured by a government program and which offer several term options, including 15- and 30-year terms. Conventional loans don’t offer a renovation component like the HomeStyle loan.

A HomeStyle loan requires an approved contractor to submit construction plans. After inspections, the bank sends the money to the contractor, and eventually, the loan gets sent to Fannie Mae. In the end, the borrower makes payments according to their loan agreement.

What is the HomeStyle Renovation loan process?

The Fannie Mae HomeStyle loan process boils down to three main phases:

• Phase 1: First, the borrower selects a contractor and submits renovation plans, then the lender reviews the documents. The lender then orders an appraisal (a written document that determines the value of a property). The lender looks into factors like the loan-to-value (LTV) ratio (the loan amount compared to the home value). You can have a maximum LTV of up to 97%.
• Phase 2: The lender and borrower close on the loan after signing documents like the renovation loan agreement. The loan money goes into a custodial account, and the lender oversees the renovation project.
• Phase 3: After the final draw request, the lender orders a final inspection (a review of the property by an inspector), checks for a clear title (to review legal ownership of the property), and submits required documents. The lender then closes the account.

How do you find a Fannie Mae HomeStyle loan?

As mentioned earlier, Fannie Mae doesn’t lend directly to homeowners. Therefore, you’ll have to find a lender that offers the HomeStyle loan. Contact your local bank, credit union, or another lender to let them know you’re interested in a HomeStyle loan. If they don’t offer this loan type, ask if they can recommend a lender that does.

Note that Rocket Mortgage does not currently offer HomeStyle loans.

What types of properties are eligible?

What kind of property can you buy using a HomeStyle Loan? You can purchase quite a few different types of homes, including a:

• Single-family detached home
• Townhome
• Condo unit/co-op unit
• Planned unit development (PUD)
• Duplex, triplex, or quadplex
• One-unit second home
• One-unit investment home
• One-unit manufactured home

For more questions about the types of real estate investments that qualify for a HomeStyle loan, check with your lender.

Down payment requirements

A down payment is the amount of money you put down as a lump sum, which goes toward the purchase of a home. HomeStyle loans generally require a 5% down payment, unless you qualify for the HomeReady program, which requires 3%. The HomeReady program encourages low- and moderate-income borrowers in minority and disaster-impacted communities to purchase a home. It also allows for credit scores as low as 620.

HomeStyle loan down payments typically range from 3% – 5% of the total loan amount (purchase price plus renovation costs). Note how if you put down less than 20%, you’ll pay private mortgage insurance (PMI) until you reach 20% equity. PMI is a type of mortgage insurance that protects the borrower; the additional expense you pay generally gets rolled into your monthly mortgage payment.

Buying a multifamily property or some other type of real estate may require a higher down payment:

• Second home: 10% (or 90% LTV ratio)
• Investment property: 15% to purchase, 25% to refinance
• Duplex/triplex/quadplex: 5% (or 95% LTV ratio)

You can also borrow up to 75% of the home’s after-repair value (ARV) (the estimated value of the home after repair) for renovations.

Using a Fannie Mae HomeStyle loan: An example

Let’s say Sadie wants to purchase a fixer-upper that will cost $100,000 in renovations. She selects a contractor and submits renovation plans to her lender, which checks to ensure the contractor is qualified. Her lender appraises the home and evaluates the maximum mortgage and loan amount, as well as Sadie’s LTV ratio.

Sadie’s lender approves her for a $300,000 HomeStyle loan for a single-family home that costs $200,000 and $100,000 in renovations. 

Her lender oversees the renovation process and approves all draws on the account. Once the renovation is complete, the lender orders a final inspection and title inspection, the appraiser signs a completion certificate, and the lender provides the loan to Fannie Mae. Sadie, who is completely satisfied with her renovations, makes her monthly mortgage payments according to her loan agreement.

What kinds of renovations does a Fannie Mae HomeStyle loan cover?

You can use HomeStyle loans for just about anything as long as repairs are completed within 12 months of the loan origination, and can include (but are not limited to):

• New flooring
• A second, smaller home on the property, such as an accessory dwelling unit (ADU)
• New landscaping, windows, doors, siding, or roofing
• Kitchen or bathroom remodel
• Mechanical upgrades and improvements, such as electrical or heating, ventilation, and air conditioning (HVAC)
• Changes to address mobility or aging in place

The renovations do not necessarily have to increase home value nor make the home habitable at closing. If you can’t live in the home during renovations, you may finance up to 6 months of principal, interest, tax, and insurance payments to cover costs during this time.

What’s not covered by a Fannie Mae HomeStyle loan

What does the HomeStyle loan not cover? Unfortunately, you can’t accomplish any of the following:

• Tear down a home
• Make structural changes to more than 50% of a manufactured home
• Build another second residential dwelling on the property
• Make improvements that are not permanent to the property such as furniture, certain types of landscaping, light fixtures, or a movable storage shed or unit

Your lender will tell you whether a HomeStyle loan can cover your plans for your property. If not, you can look into other types of loans to help you achieve your goals, which we’ll discuss below.

What you can roll into your HomeStyle Renovation loan

You can roll certain costs into your HomeStyle loan. This means you don’t have to pay these costs outright when you opt for this loan type. You can roll the following into your loan:

• Living costs for a rental while the home is being renovated
• Closing costs
• Permit and license fees
• Project contingency reserves

The benefit of rolling these costs into your HomeStyle Renovation loan: You don’t have to come up with the money immediately. However, keep in mind that it might inflate your mortgage payment and cause you to owe more money over time, particularly in terms of interest over time.

How can you qualify for a Fannie Mae HomeStyle loan?

Generally, you’ll need a minimum 620 credit score to qualify for a Fannie Mae HomeStyle loan, a down payment of at least 5% (or 3% with the HomeReady program), and a debt-to-income (DTI) ratio of less than 50%. Your DTI shows the amount of debt you have against the amount of money you bring into your household.

However, every applicant brings different credentials and qualifications to the table, so check with your lender to learn more about your personal situation.

What credit score do you need for a Fannie Mae HomeStyle loan?

You’ll need a minimum credit score of 620 to qualify for a Fannie Mae HomeStyle Renovation loan. Several factors influence your credit score, including your payment history, unpaid debt amounts, number of loan accounts you have, type of existing loans, length of loan accounts open, available credit usage and new applications open. Your credit score also depends on whether you’ve had debt sent to a collection agency or have had a foreclosure or bankruptcy.

If you don’t quite have the required 620 score, you can raise it by paying off debt, checking for errors on your credit report, and more.

What debt-to-income ratio do you need for a Fannie Mae HomeStyle loan?

You’ll need a DTI ratio of less than 50% to qualify. You can figure out your DTI by adding up all the debt you owe – your regular, recurring monthly debt payments – and divide that figure by your gross monthly income. Then, multiply that amount by 100 to get your percentage. The quickest way to improve your DTI involves paying down debt.

What are the current loan limits for a Fannie Mae HomeStyle loan?

To qualify for a Fannie Mae loan, you must also adhere to certain loan limits published by the Federal Housing Finance Agency (FHFA) in 2025, called conforming loan limits. If a loan exceeds these limits, it’s considered a non-conforming loan (or jumbo loan).

The 2025 loan limits are the same for all conforming loans that follow Fannie Mae and Freddie Mac guidelines. If your renovation and home will cost more than these limits, check with your lender to learn more about your options:

• For a single-family home, borrowers can take a loan amount up to $806,500.
• In high-cost metro areas, the mortgage limit is $1,209,750 for a single-family home.
• For a multifamily property, borrowers can borrow up to $1,551,250 for a four-unit property, or up to $2,326,875 in a high-cost area.

Fannie Mae HomeStyle loan interest rates

HomeStyle loan interest rates are often comparable to conventional mortgages and lower than home equity lines of credit (HELOCs) or home equity loans. Therefore, you usually won’t see comparably high interest rates with these loans.

You can choose standard mortgage terms like 15 or 30 years, and even refinance an existing mortgage into a HomeStyle loan to fund renovations. It’s a good idea to get quotes from at least three lenders and compare offers.

Fannie Mae HomeStyle loan alternatives

If you’re not sure a Fannie Mae HomeStyle Renovation loan is the right option for you, you can tap into several other types of loans worth considering: FHA 203(k) loans, home equity loans, and HELOCs. Let’s walk through each one.

Federal Housing Administration (FHA) 203(k) loan

Similar to the Fannie Mae HomeStyle loan, a FHA 203(k) loan, backed by the Federal Housing Administration (FHA), allows you to finance or refinance to combine both mortgage and home renovation costs into a single loan. You can put the funds toward both material and labor costs, which will also take the form of a 15- or 30-year fixed-rate or adjustable-rate mortgage (ARM). They come with more flexible borrowing requirements than conventional loans – unlike a HomeStyle loan, this is a government-backed loan.

The 203(k) loan comes in two forms: A streamline 203(k) covers homes requiring up to $35,000 worth of repairs, while a standard 203(k) covers homes requiring major structural repairs exceeding $35,000.

Home equity loans

You can also consider a home equity loan, which allows you to tap into the equity in your home, or the amount you’ve paid off. Equity is the amount your property is worth, minus your existing mortgage. Unlike a HomeStyle loan, a home equity loan is a second mortgage on your home that you repay in fixed installments over a certain term.

You can use the money from your home equity to make needed repairs, but you can also use the home equity loan for anything – not just construction on your home. Home equity loans are usually fixed-rate loans, so the interest stays the same over the loan term.

HELOCs

Like home equity loans but unlike the Fannie Mae HomeStyle loan, home equity lines of credit (HELOCs) are second mortgages. They are similar to credit cards because you can access funds as you need them. You can also use your HELOC funds however you want, unlike a HomeStyle loan, which is designed only for renovations.

Most HELOCs carry variable rates that are slightly higher than mortgage rates but lower than personal loans or credit cards. Your lender will let you know how much you can withdraw from your HELOC.

FAQ

Still curious about whether or not a Fannie Mae HomeStyle loan is the right option for you? Take a look at our FAQs below.

Is it hard to get a home renovation loan?

It isn’t necessarily difficult to get a home renovation loan, but it can be more complex than a traditional mortgage because you must find a lender that offers one. In addition, you must also select a contractor and go through the process of getting the repairs/renovations approved by the lender. Traditional mortgages eliminate these construction approval steps.

Can you bundle HomeStyle loans with other Fannie Mae programs?

Yes, you can bundle HomeStyle loans with HomeStyle Energy and HomeReady. The HomeStyle Energy program offers financing for energy-related improvements as part of a purchase or refinance to upgrade outdated homes with more energy-efficient appliances for reduced utility costs. You can also use it to pay off energy-related debt.

The HomeReady program allows low-income borrowers to purchase a home with as little as 3% down with flexible income sources and reduced PMI costs. Borrowers do not have to be first-time home buyers, but if you are, you can qualify for a $2,500 credit toward down payment or closing cost assistance.

Can you do the renovations yourself and still qualify for this kind of loan?

If you’re handy, yes, you can do the renovations yourself, but you must also follow certain lender approval guidelines: You cannot purchase or renovate a manufactured home – only a one-unit property. The DIY portion of the renovations may also not represent more than 10% of the “as completed” value of the property.

Your lender must also review and approve the renovations in advance and must inspect anything that costs at least $5,000. You can ask for reimbursement for the cost of materials, but not for labor.

The bottom line: A Fannie Mae HomeStyle loan might be right for you

If you’ve cast a vision for your home and can’t wait to implement a brand-new look, the Fannie Mae HomeStyle loan can offer a great option. Do your research by looking into other options, too – and definitely compare interest rates. You can explore many flexible ways to tackle your goals, and Rocket Mortgage is committed to helping you.

While Rocket Mortgage doesn’t offer HomeStyle loans, you can tap into home equity loans through Rocket.

Ready to begin your home buying journey? Learn more about home equity loans and other options to get started.