Renovate and Own with One Loan: How the Fannie Mae Homestyle Purchase Program Works

  • Tags: Calculators, New Construction, Spec Homes

If you’ve found the right house in the wrong condition, or you’re looking to customize a property before move-in, the Fannie Mae HomeStyle Renovation Loan may be your perfect financing solution. This program combines the purchase price and renovation costs into one conventional mortgage—allowing you to buy and build your dream home with a single closing.

Here’s how a Conventional Renovation HomeStyle Purchase Loan Calculator helps you estimate your monthly payment, cash to close, and eligibility.

Step 1: Understand the Project Scope

Let’s say you’re buying a property that needs significant updates:

  • Purchase Price: $500,000
  • Renovation Costs: $100,000
  • After Repair Value (ARV): $600,000
  • Loan Term: 30 years
  • Estimated Interest Rate: 7%

You’ll also want to estimate annual insurance ($2,400), annual property taxes ($5,000), and confirm there’s no HOA fee.

Step 2: Total Costs and Loan Structure

The HomeStyle loan lets you finance nearly all of your acquisition and rehab costs, plus a 10% contingency reserve in case of overruns.

  • Total Property Costs: $610,000
  • 6 Months Interest Reserve (no payments during construction): $21,350
  • Estimated Closing Costs (6%): $37,881

Total Financeable Costs: $669,231

Conventional lending guidelines set a maximum allowable loan based on the lower of your ARV or total project cost. In this scenario:

  • Max Loan Amount (based on LTV): $582,000
  • Down Payment (3% minimum): ~$18,000

Step 3: Estimate Your Monthly Mortgage Payment

Once the renovation is complete and the loan converts to permanent financing, here’s what your monthly payment might look like:

  • Principal & Interest: $3,872
  • Taxes: $417
  • Insurance: $200
  • PMI (Private Mortgage Insurance): $155

Total Monthly Housing Expense: $4,644

This estimate includes mortgage insurance, which typically applies when putting down less than 20%.

Step 4: Cash Needed to Close

Your out-of-pocket amount depends on whether you receive seller credits or down payment assistance (DPA):

  • No Credits or DPA: ~$87,231
  • With 3% Seller Credit: ~$72,231
  • With 3% Seller Credit + 3% DPA: ~$57,231

DPA Warning: Many DPA programs restrict your ability to refinance or sell for the first 3–5 years and may claw back equity or subsidies. If you’re financially able to proceed without assistance, you’ll retain more control and benefit more from future appreciation.

Step 5: Qualifying Income

Based on your projected payment, you’ll need sufficient income to qualify:

  • Target Monthly Income Needed: $9,288
    This estimate follows Fannie Mae’s guideline of up to 50% debt-to-income ratio. If you have minimal additional monthly debt, this may be attainable with a gross income near $110,000 annually.

Why Choose HomeStyle Renovation?

This program is ideal for:

  • Buyers who want to personalize a home before moving in
  • Investors purchasing a 1-unit rental property for renovation
  • Buyers priced out of fully updated homes in competitive markets
  • People who want one loan and one closing instead of separate financing for purchase and rehab

Unlike FHA 203(k), the HomeStyle loan allows luxury upgrades, pools, and even accessory dwelling units (ADUs), subject to approval and appraisal.

Final Thoughts

The HomeStyle Renovation Loan gives you the power to buy the property as-is and finance everything you need to transform it. With a single mortgage, you avoid the headaches of juggling multiple loans and timelines—while creating instant equity and long-term value.

Ready to Get Preapproved for Renovation Financing?

Our team can help you structure the loan, review contractor bids, and guide you through each phase—from offer to final draw. Let’s build something better—together.

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Important Disclaimer

This calculator is for illustrative purposes only and does not constitute financial, legal, or investment advice. Results are based on general assumptions and may not reflect actual performance or eligibility. This is not a loan estimate or approval. Please consult with a licensed mortgage advisor before making financial decisions.

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