FHA 203k Versus Fannie Mae HomeStyle Renovation Loans
If you want to take out a renovation loan, you can decide between the Fannie Mae HomeStyle loan or the FHA 203k rehab loan. Both of these loans are one-time construction loans and have several differences. Here are the key differences between an FHA 203k loan and a Fannie Mae HomeStyle loan:
- Credit Score. The minimum credit score requirement for an FHA 203k rehab loan is 640; the minimum credit score requirement for a Fannie Mae HomeStyle loan is 680.
- Underwriting Process. The underwriting process for an FHA 203k loan is much easier than the underwriting process for a Fannie Mae HomeStyle loan. The Fannie Mae HomeStyle loan underwriting process is extremely stringent and detail-focused.
- Gift Funds. Gift funds are allowed as part of a partial or full down payment for an FHA 203k loan; the allowance of gift funds for a down payment for a Fannie Mae HomeStyle loan is determined on a case-by-case basis.
- Purchase or Refinance. Both loan types can be used to either purchase or refinance a home.
- Closing Costs and Down Payment. The minimum down payment for an FHA 203k loan is 3.5% and may be gifted. Closing costs can also be paid with a seller contribution. The minimum down payment for a Fannie Mae HomeStyle loan is 5% and usually has lower closing costs than an FHA 203k loan.
- Loan Type. The FHA 203k loan is an FHA loan, and the Fannie Mae HomeStyle loan is a conventional loan. The former allows for cosmetic changes and less-complicated upgrades; the latter allows for major changes and renovations.
- Loan Limits. The FHA 203k loan’s limits vary but generally don’t exceed $271,050. The Fannie Mae HomeStyle loan’s limits don’t exceed $417,000.