There’s several differences between the Fannie Mae HomeStyle Renovation Loan and the FHA 203k Loan, but one of the major differences is their guidelines rsurrounding mortgage insurance.
FHA loans come with upfront mortgage insurance AND monthly mortgage insurance. The upfront mortgage insurance on a FHA loan is 1.75% of the loan amount. So for example, if we have a loan amount of $500,000, 1.75% of that is $8,750 which is added to your loan amount.
FHA loans also come with monthly mortgage insurance that in most cases, will never go away. Typically the mortgage insurance is .8-.85% of the loan amount, and paid on a monthly basis. Again, it will never go away.
Fannie Mae loans do not have any upfront mortgage insurance. Fannie Mae also only requires mortgage insurance when buyers put less than 20% down, and even when they require mortgage insurance, they allow for it to be removed after time, AND sufficient equity in the property.
So if you’re a home buyer, and you qualify for both the Fannie Mae HomeStyle Renovation Loan and the FHA 203(k) loan, I would take long hard look at that Fannie Mae HomeStyle Renovation Loan for the simple fact that it typically comes with less expensive mortgage insurance.