Renovation mortgages are simply new mortgage loans that include the renovation funds to make those needed repairs. It can be for a purchase or a refinance. The FannieMae
HomeStyle® Renovation Mortgage is one of the most popular along with the FHA 203k loan
program for doing this.
Why would you choose the FannieMae product over the FHA 203k?
Economics, simple economics. If you have good credit and 20% down payment you can get out of PMI (Private Mortgage Insurance). If your down payment is less than 20% you are still subject to some PMI but it goes away after eleven years while the 203k PMI now carries with you through the term of the loan or until you refinance out of it.
We consult for both products and quite often help the client go from one to another. Most of our lender partners have been doing a great job of putting the clients into the proper program and this hasn't been an issue.
These programs are actually available all of the USA and it's colonies. They are also called home improvement loans. Where can you get construction financing for about 4% 30-year fixed rate? Anywhere you can get a HomeStyle® Renovation Mortgage or an FHA 203k.