It’s rare that any buyer finds a home that matches his or her tastes exactly. Many of us want to make a few changes, and that’s what a HomeStyle Renovation (HSR) mortgage is designed to do. HSRs are offered through the Federal National Mortgage Association (FNMA), commonly known as Fannie Mae. Fannie Mae is a government-sponsored enterprise (GSE) that buys mortgages that meet Fannie Mae’s qualifications from mortgage lenders.

Cost-effective renovations

The HSR mortgage allows borrowers to get a new mortgage or refinance an existing mortgage, and get enough extra funds to cover renovations, repairs, remodeling or even energy-efficient improvements. That allows home buyers or refinancers to make major repairs for homes to meet or exceed up-to-code standards or just update or remodel a home.

Borrowers can make repairs or improvements that total up to 50 percent of the home’s “as-completed” appraised value as part of their first mortgage. The “as-completed” value is the market value of the home, including the renovations. HSRs help buyers or refinancers avoid an expensive second mortgage, home equity line of credit or other costly loans. Also, you’ll only have one loan closing, which saves time and money, and first-mortgage loans typically offer lower interest rates than home equity or other types of repair financing.

What kind of home can I buy with an HSR?

HSR mortgages can be obtained for primary residences or second homes/investment properties. If used for a primary residence, the HSR allows the purchase of single-family homes, condos and up to a four-unit, multi-family home. For investment properties and second homes, no multi-family properties are allowed.

What does an HSR cover?

There are no restrictions on the type of repairs or improvements, except that they must be permanently affixed to the property and add to the value of the property. If an HSR is used for energy improvements, borrowers must get an energy report that shows the recommended improvements and the estimated cost savings from them.

Can I do the improvements myself?

HSR loans require you to hire a licensed contractor that is approved by your lender. While you may do some work yourself, any do-it-yourself work will have to be reviewed by your lender and approved in advance, and no more than 10 percent of the “as-completed” value can come from DIY projects. Your lender must inspect any work that costs more than $5,000, and as a do-it-yourselfer, you will be reimbursed for materials only, not labor. In addition, any plans or drawings used for your renovation must be completed by a licensed, certified professional.

How long do I have for construction?

Renovations must be completed within six months of closing your loan. And you will have to make your full monthly mortgage payment during the renovation period.

Find out more about HSRs from Embrace Home Loans

HSRs are a great way to turn a property with potential into a home you’ll love. Down payments and loan terms vary for different borrowers and projects. If you’re interested in an HSR, Embrace Home Loans can provide you with assistance every step of the way. Contact us today at 800-333-3004, extension 3560 or visit our website at