Fannie Mae HomeStyle® and Freddie Mac CHOICERenovation® are two popular renovation loan programs offered by BankSouth Mortgage. There are similarities and differences between the two programs that borrowers should know before choosing which program to apply for.
The eligibility requirements for both HomeStyle® and CHOICERenovation® loans are similar. Both programs require the property to be a single-family or 2-4-unit residence, which can function as a primary, secondary, or investment property; however, there is a lower LTV on the secondary and investment property options.
HomeStyle® and CHOICERenovation® loans allow buyers to finance certain repairs or renovations to a property. Loan amount limits follow standard agency guidelines. On a purchase, the maximum cost of renovation is up to 75% of the lesser of the sum of the purchase price plus renovation cost OR the as-completed appraised value of the property. For a refinance, the maximum cost of renovation is up to 75% of the as-completed appraised value of the subject property.
HomeStyle® and CHOICERenovation® loans allow for a wide range of improvements, but all must be permanently affixed to the property.
Disbursement of Funds:
For HomeStyle®, the approved contractor may draw up to 50% of the planned materials cost at closing. Subsequent draws are disbursed with written consent from the borrower and the receipt of mid-draw property inspection reports. Choice will allow a 100% draw at closing for the cost of renovations purchased from a home improvement store.
The appraisal process for both the HomeStyle® and ChoiceRenovation® loans requires an appraisal subject to completion of the renovation on a purchase for both programs and then a final inspection once the work is completed.
Project Completion Timelines:
HomeStyle® requires that the work be done within 15 months from the day of closing. CHOICERenovation® allows for two options: CHOICERenovation® standard allows for 450 days from the day of closing, and CHOICEReno eXPress® allows for 180 days from closing.
In summary, Fannie Mae HomeStyle® and Freddie Mac CHOICERenovation® loans are great options for borrowers financing a renovation project. The primary differences between the two programs are eligibility requirements, loan limits, and disbursement of funds. Our loan officers at BankSouth Mortgage are product experts and are prepared to walk you through all the renovation loan products we carry so that you get the best loan product to meet your needs.