Maryland Conventional Renovation Loan

How Fannie Mae HomeStyle renovation financing works

This solves a problem that otherwise ends a lot of Maryland house hunts. The home is right on layout and location but wrong on condition; the work needs money you will not have until after closing; and a lender will not lend against a property in poor repair. Renovation financing breaks that loop by underwriting the house as it will be.

HomeStyle is the conventional answer to that problem. Because it is a Fannie Mae product it follows ordinary conventional guidelines — credit, income, reserves, mortgage insurance that can be cancelled at around 20% equity — with a layer of renovation-specific rules on top.

How the as-completed appraisal changes your buying power

This is the concept the whole program turns on, and it is worth slowing down for.

On an ordinary mortgage, an appraiser values the house as it stands today. On a HomeStyle loan, the appraiser is given your contractor’s plans and specifications and produces two figures in one report: the as-is value and the as-completed value — an estimate of what the property will be worth after the renovation work is finished.

Your financing is measured against that second number. The renovations you are planning are, quite literally, what create your borrowing power.

The corollary matters just as much, and it is where optimistic projects come unstuck: an ambitious renovation budget does not automatically mean you can finance all of it. If the appraiser concludes the finished home will be worth $420,000 rather than $460,000, the maths changes and some of the scope has to be funded another way or trimmed.

Two practical consequences follow. Scope the project with resale value in mind rather than purely to taste, because over-improving beyond what the neighbourhood supports will not produce a value that carries the budget. And expect the appraisal to take longer than a standard one — build that into your contract dates.

How much renovation can you finance?

There is no required list of repairs and no minimum dollar amount. What exists instead is a ceiling on how much of the deal the renovation can represent.

In practice the renovation cap is rarely the binding constraint for a typical Maryland buyer. The things that usually decide project size are the as-completed appraised value, what you qualify to repay, and the conforming loan limit for your county.

Down payment and loan-to-value

HomeStyle follows ordinary conventional down payment rules. What you need depends far more on how you will use the property than on the fact that a renovation is involved.

3% down on a one-unit primary residence is genuinely available, which puts conventional renovation financing within reach of buyers who assume they need 20%. The maximum loan-to-value for any given scenario comes from Fannie Mae’s eligibility rules and the automated underwriting decision for your specific occupancy, unit count and credit profile — so treat the figures above as the working minimums rather than a guarantee.

One more advantage worth naming, because it is a genuine long-run cost difference: conventional mortgage insurance can generally be cancelled once you reach roughly 20% equity. On a low-down-payment FHA loan, mortgage insurance often lasts the life of the loan. On a renovation purchase where the finished value may exceed what you paid, that distinction can matter sooner than you would expect.

Credit score and debt-to-income

620 is the working minimum credit score for conventional renovation financing, and in practice approvals and pricing are meaningfully better at 660 and above.

Both of those are worth understanding for what they are. Fannie Mae does not publish a blanket minimum credit score for HomeStyle; conventional qualification is driven by the automated underwriting decision, the eligibility rules for your scenario, and your complete profile. The 620 floor comes from the product and investor standards layered on top, and the 660 observation reflects pricing reality rather than a published rule. Both are useful numbers to plan around — they are simply not federal requirements.

Debt-to-income generally runs up to about 45%, and this is a benchmark rather than a hard ceiling. Automated underwriting weighs the whole file, and a strong profile — reserves, credit depth, stable income, a lower loan-to-value — can support a higher ratio than a thin one. A weak profile may not reach 45%.

Primary residence, second home or investment property

This is one of the two headline advantages over FHA 203(k), and for some buyers it is the whole reason the conversation happens.

FHA 203(k) is limited to primary residences. HomeStyle is not. Eligible property types are a one- to four-unit principal residence, a one-unit second home, a one-unit investment property, a manufactured home, or a unit in an eligible PUD, condominium or co-op project.

Three practical readings of that:

• Investors can renovate. A one-unit rental in need of a kitchen and systems rehab can be bought and renovated on a single conventional mortgage rather than with cash or short-term financing.
• Second homes qualify. A dated place near the water or in the mountains can be financed and updated together.
• House hacking works. A two- to four-unit building you will live in is eligible as a principal residence, so you can renovate the units while occupying one.

The trade-off is the down payment. A second home generally starts around 10%, against as little as 3% on a one-unit primary residence.

Investment properties: HomeStyle Renovation may be available for eligible one-unit investment properties. Maximum financing depends on current Fannie Mae eligibility requirements, the transaction and the lender’s renovation guidelines — so the down payment on an investment purchase is worth confirming for your specific scenario rather than assuming a figure.

What renovations can HomeStyle finance?

Unusually for a renovation product, there is no prescribed list. Improvements generally need to be permanently affixed to the property and to add value to it. Within that, the scope is broad.

Structure, systems and envelope

• Roofs, gutters and downspouts
• Heating, cooling, plumbing and electrical systems
• Windows, doors and siding
• Foundation repair and water-damage repair
• Well and septic systems

Living space

• Kitchen and bathroom remodels
• Flooring throughout
• Basement finishing and attic conversion
• Room additions
• Garages, attached or detached

Health, efficiency and accessibility

• Mould remediation and lead-paint abatement
• Energy-efficiency improvements
• Accessibility modifications

Soft costs you can also finance

• Permits
• Architect and designer fees
• Engineering fees
• Inspection costs during the renovation period
• A contingency reserve, where one is established
• Up to six mortgage payments where the home cannot be occupied

Those soft costs are easy to overlook and add up quickly on a substantial project. Permits and professional fees on a Maryland addition can run into thousands before a single trade turns up, and financing them keeps the money in the mortgage rather than out of your savings.

Maryland’s older housing stock makes several of these especially relevant. Lead-paint abatement matters on pre-1978 homes, of which the state has a great many. Well and septic work is a recurring theme outside public service areas. And energy work on a draughty older house frequently pays for itself in a way a new kitchen does not.

Can HomeStyle finance a pool or other luxury improvements?

Yes — and this is the single clearest advantage over FHA 203(k), which will not finance luxury items at all.

Fannie Mae’s guidance is explicit that acceptable structures include, but are not limited to, accessory units, garages, recreation rooms and swimming pools.

In practice that opens up:

• In-ground swimming pools
• Detached garages and outbuildings
• Gazebos, patios, porches and outdoor living space
• Finished basements and recreation rooms
• Accessory dwelling units

If a pool, a detached garage or an outbuilding is genuinely part of your plan, HomeStyle is usually the loan that makes it possible. It is the most common reason a buyer moves off an FHA 203(k) and onto the conventional product.

What if you cannot live in the home during renovation?

Fannie Mae does not require the property to be habitable at closing, which is what makes substantial rehabilitation possible. That creates an obvious problem: if you cannot live there, you are paying rent somewhere else and a mortgage.

HomeStyle addresses it directly. Where the property cannot be occupied during the work, up to six mortgage payments coming due during the renovation period may be included in the total renovation costs. Those payments cover principal, interest, taxes, insurance and any association dues.

It is also conditional on the home genuinely being unoccupiable. A project you can live around does not qualify for it, and should not need it.

Contingency reserves and unexpected costs

Open a wall in an older Maryland house and something turns up that nobody priced. A contingency reserve is the money set aside for exactly that.

The requirement depends on the property:

• One-unit properties: a contingency reserve is not required by Fannie Mae. Your lender may still establish one, and on an older home or an ambitious scope that is often sensible rather than obstructive.
• Two- to four-unit properties: a reserve equal to 10% of the total costs of the repairs and renovation work must be established.
• Larger or more complex projects: the lender may increase the reserve to 15%, based on the scope and scale of the work.

Note what the percentage applies to: it is 10% of the renovation costs, not of the property’s value.

The reserve can be used for labour, materials, fees, permits, plans and specifications, inspection costs and other renovation-related expenses. If it is not needed, unused contingency funds reduce your loan balance at the end — or, with lender verification that the original work is complete and appraiser inspection of the new work, they can be put toward additional improvements.

Contractor requirements — and doing work yourself

The contractor is reviewed as carefully as you are, because the lender is financing an asset that does not exist yet.

Before the appraisal, your contractor generally needs to provide:

• An itemised, fixed-price bid with plans and specifications for the work
• A current contractor’s licence
• Proof of liability insurance
• The lender’s contractor-approval paperwork

The plans and specifications matter beyond the paperwork: they are what the appraiser uses to develop the as-completed value. A vague scope produces a conservative value, which shrinks what you can finance.

Can you do the work yourself?

This is widely reported as a flat no. The accurate answer is more useful than that.

Practically: if DIY is central to your plan, ask each lender directly whether they permit it on HomeStyle, because many will simply decline to. If you are told it is impossible, that is worth testing rather than accepting.

How renovation funds are held and released

At closing, the renovation money is deposited into an escrow account for your benefit. You do not receive it, and your contractor is not paid up front.

Funds come out in draws as work is completed and verified. Fannie Mae is specific about how the money may move:

• By a check issued jointly to you and the contractor, or
• By wire transfer to the contractor after the lender has obtained written consent

Both routes put you in the loop by design. Nobody gets paid without your involvement, which is the single best protection you have during a renovation.

Eligible soft costs such as permits and architect fees can be paid from the initial escrow draw at closing, so those do not have to wait for work to begin.

When the project finishes, any money left in the account has two possible destinations: it reduces the unpaid principal balance of your loan, or — with the lender verifying the original work is complete and the appraiser inspecting the additions — it can fund further improvements. Leftover renovation funds are not simply paid out to you.

How long do you have to complete the renovation?

Renovation work must be completed no later than 15 months from the date the loan closes.

That is a genuinely generous window compared with other renovation products, and it is one of the reasons HomeStyle handles large projects well. Extensions beyond 15 months — up to 18 — are possible with lender approval through Fannie Mae’s systems, but an extension is a request rather than an entitlement.

Fifteen months sounds like plenty until permitting, materials lead times and a contractor’s other commitments compress it. Maryland permitting timelines vary substantially by county and by municipality, so build the local approval process into your schedule at the planning stage rather than discovering it in month four.

Renovation or new construction?

There is a boundary here, and Fannie Mae draws it clearly: HomeStyle Renovation may not be used for complete tear-down and reconstruction of the dwelling.

You can do a great deal to an existing house — additions, structural alterations, gutting and rebuilding interiors, finishing basements, adding garages. What you cannot do is remove the dwelling and put a new one in its place. At that point the project is new construction and needs construction financing instead.

One useful nuance sits at the other end: HomeStyle can be used to complete a home that is already 90% or more finished, where the remaining work is limited to completion of the original scope.

If your project genuinely is a tear-down, a conventional single-close construction loan is the right structure. That is a different product with different appraisal and disbursement mechanics, and we cover construction financing separately.

Can you use HomeStyle on a manufactured home?

Yes, with tighter limits. Manufactured housing is eligible for HomeStyle, and two restrictions apply:

• Renovation funds are capped at 50% of the as-completed appraised value rather than 75%
• Improvements cannot include structural changes to the unit

Within that, the eligible work is what you would expect: kitchen and bathroom updates, energy-efficient heating and cooling systems, accessibility modifications, and new windows, doors, siding or roofing that do not alter the home’s structural integrity.

Standard Fannie Mae manufactured-home requirements also apply on top — the home must be real property on a permanent foundation, and the usual construction and titling rules govern. If you are looking at a manufactured home specifically, it is worth confirming eligibility on the individual property early, because the requirements are more prescriptive than for site-built housing.

Purchase or refinance?

Both work. HomeStyle is eligible for purchase transactions and limited cash-out refinances.

For a buyer, it means finding a home that is nearly right and financing the work that makes it right, in one transaction.

For an existing owner, it means refinancing your current mortgage and rolling the renovation budget in — putting the work on a 30-year fixed mortgage rather than on a credit card, a personal loan or a second lien.

Maryland conforming loan limits

HomeStyle is a conforming conventional loan, so the total loan amount must stay within the conforming limit set annually by the Federal Housing Finance Agency. On a renovation loan the total means the purchase price (or current value) plus the financed renovation costs — not just the price of the house.

This is the one area where Maryland differs materially from most states. Maryland is not a single-limit state. Nineteen of its twenty-four jurisdictions sit at the national baseline, and five Washington-metro counties are designated high-cost with substantially higher limits.

The practical effect is real. A buyer renovating in Frederick County has meaningfully more room than one doing the same project in Washington County, and a large project in the Washington-metro counties can stay conforming where it would exceed the limit elsewhere in the state.

If a project would push the total past the conforming limit, a jumbo renovation product or a different structure may be the answer. Limits are revised annually, so confirm the current figure for the specific county before finalising a budget.

HomeStyle Renovation vs FHA 203(k)

These are the two main renovation loans, and most Maryland buyers are choosing between them. Both finance a purchase plus renovations in one mortgage. The right answer usually comes down to credit, occupancy and whether luxury items are on the list.

In short: FHA 203(k) is often the better fit when credit is bruised or cash to close is tight on a home you will live in. HomeStyle is usually stronger when you have solid credit, when the scope includes luxury items, or when the property is a second home or an investment.

Compare this option with other Maryland renovation loan programs.

Our Maryland FHA loans guide covers FHA financing more generally if that looks like the likely path.

When HomeStyle makes sense — and when it does not

It is a strong fit when:

• You have found a Maryland home that is right on location and layout but wrong on condition
• Your scope includes luxury improvements a government renovation loan will not finance
• You are renovating a second home or an investment property
• You have solid credit and want mortgage insurance you can eventually cancel
• The project is larger than a small repair list and you would rather finance it than drain savings
• You want a generous 15-month window for a substantial project
• You already own an eligible home and want to fund improvements through a refinance

Another path is probably better when:

• Your credit is below about 620 — FHA 203(k) is the more realistic route
• You are a veteran — VA renovation financing offers zero down with no monthly mortgage insurance
• The property is in a USDA-eligible area and your income fits — USDA renovation financing also requires no down payment
• The total would exceed the conforming loan limit for the county
• You want to tear the house down and rebuild — that is construction financing
• The work is small enough that you can comfortably pay for it after closing
• You already have substantial equity and a home equity loan, HELOC or cash-out refinance would be simpler and cheaper for a modest project

That last point deserves honesty. Renovation loans carry real administrative overhead — contractor approval, an as-completed appraisal, escrow, inspections and draws. For a $12,000 bathroom on a home you already own with equity, a simpler product is usually the better answer. HomeStyle earns its complexity on projects where the financing genuinely would not work otherwise.

The process, step by step

1. Get pre-approved. Credit, income and goals reviewed, with an estimate of borrowing capacity based on a projected after-improved value.
2. Find the property and define the scope. Choose the home — or, on a refinance, confirm the project on your current home — and outline the work.
3. Contractor and bid. Select a licensed contractor and obtain a detailed, fixed-price bid with plans and specifications for lender review, along with licence and insurance documentation.
4. As-completed appraisal. The appraiser values the home both as-is and as-completed using the plans, and that after-improved value sets your maximum financing.
5. Underwriting. You and the project are reviewed together. Both have to work.
6. Close. One closing. Renovation funds go into the escrow account, and eligible soft costs can be paid from the initial draw.
7. Renovation and draws. Work begins after closing. Funds release as work is completed and verified, by joint check or by wire with your written consent.
8. Completion. Final inspection, and any funds left in escrow reduce your loan balance or go toward additional approved improvements.

Common mistakes

• Confusing as-is and as-completed value. Your borrowing power comes from the finished value, and scoping without understanding that leads to budgets that do not fit.
• Confusing the 75% renovation cap with a 75% LTV limit. They are unrelated, and the confusion talks buyers out of loans they could have had.
• Hiring a contractor who has never done a renovation loan. The draw and inspection rhythm is specific and an inexperienced contractor stalls the timeline.
• Starting work before closing. Work done beforehand may not be financeable.
• Assuming DIY is banned outright. Fannie Mae permits limited self-help work; many lenders decline it. Ask rather than assume.
• Expecting to be paid for your own labour. Sweat equity is never reimbursed — only materials and contracted labour.
• Under-budgeting. Change orders and overages are tight; a realistic bid and a contingency matter, especially on older homes.
• Over-improving for the neighbourhood. The as-completed appraisal has to support the whole loan.
• Forgetting the county loan limit. Purchase price plus renovation has to fit within it, and Maryland limits vary substantially.
• Choosing the wrong program. Luxury scope, a second home or a rental rules out FHA 203(k); credit below 620 usually rules out HomeStyle.
• Assuming six months of payments are free. They are financed into your loan, not waived.
• Planning a tear-down. That is construction financing, not renovation.

Frequently asked questions

Sources

This page explains how Fannie Mae HomeStyle Renovation financing generally works for Maryland homebuyers and homeowners. It does not determine individual eligibility, is not a commitment to lend, and is not a Loan Estimate. Any figures shown are arithmetic illustrations, not quotes, and no interest rate is offered or implied. Program terms are set by Fannie Mae and are subject to change, and participating lenders may apply additional requirements that differ from lender to lender. Approval depends on a full underwriting review, program availability, borrower eligibility, property type and the applicable conforming loan limit. Maryland Homebuyer Hub is not affiliated with, endorsed by, or acting on behalf of Fannie Mae, the Federal Housing Finance Agency, or any government agency.