September 2022
FNMA HomeStyle vs FHA 203(k) Standard vs Limited
FNMA HomeStyle FHA 203(k) Standard FHA 203(k) Limited
Amortization/Term Fixed: 10/15/20/25/30 Year Fixed: 10/15/20/25/30 Year
ARMs: 5/1 CMT
Fixed: 10/15/20/25/30 Year
ARMs: 5/1 CMT
Loan Purpose Purchase
Rate & Term Refinance
Purchase
Rate & Term Refinance
Purchase
Rate & Term Refinance
Occupancy 1-4 unit Primary residence
1 unit Second home
1 unit Investment property
1-4 unit Primary residence 1-4 unit Primary residence
Property Type SFR (Attached/Detached)/PUD/Condo SFR (Attached/Detached)/PUD/Condo SFR (Attached/Detached)/PUD/Condo
AUS DU Approve/Eligible FHA TOTAL Scorecard approval FHA TOTAL Scorecard approval
Credit Score 680 580 580
DTI 50% 50% (for DTI > 50% either credit score >= 640 or LTV 5% below
maximum is required)
50% (for DTI > 50% either credit score >= 640 or LTV 5% below
maximum is required)
LTV/Loan Amount
Calculation
Purchase
LTV is determined by dividing
the loan amount by the lesser of
a) Purchase Price + Total
Renovation Costs or
b) “As completed” value
Refinance
LTV is determined by dividing
the loan amount by the “as
completed” value of the
property
Maximum loan amount is the max LTV multiplied by the lesser of
a) Adjusted As-Is Value + Total Rehabilitation Cost or
b) 110% of the After Improved Value (100% for condos)
Loan amount cannot exceed nationwide mortgage limits
Maximum loan amount is the max LTV multiplied by the lesser of
a) Adjusted As-Is Value + Total Rehabilitation Cost or
b) 110% of the After Improved Value (100% for condos)
Loan amount cannot exceed nationwide mortgage limits
LTV Limits | Primary
Residence
1 unit: 97% LTV FRM ¹
95% LTV ARM
2 unit: 85% LTV
3-4 unit: 75% LTV
Purchase
96.5% LTV ²
*AUS maximum is 106.15%
Refinance
97.75% LTV ²
*AUS maximum is 107.52%
Purchase
96.5% LTV ²
*AUS maximum is 106.15%
Refinance
97.75% LTV ²
*AUS maximum is 107.52%
LTV Limits | Second Home 1 unit: 90% LTV Not allowed Not allowed
LTV Limits | Investment
Property
Purchase
1 unit: 85% LTV
Refinance
1 unit: 75% LTV
Not allowed Not allowed
Renovations, Draws, Reserves
Minimum Renovation
Amount
No minimum $5,000 No minimum
Maximum Renovation
Amount
75% of the “as completed” value of the property No maximum
FHA mortgage limits still apply
$35,000
Eligible Renovations Renovations or repairs that are permanently affixed to the
property
Remodeling and repairs including structural (e.g. structural
damage repairs, exterior decks, patios, porches, etc)
Minor remodeling and non-structural repairs only (e.g.
repairing/replacing plumbing, heating, electrical systems, roofing,
installing new appliances, repairing an existing swimming pool,
etc)
Ineligible Renovations Please refer to Pennymac HomeStyle Product Profile, see
Property: Ineligible Types
- Purchase or repair of luxury items (e.g. new swimming pool, hot
tub, barbeque pit, gazebo, etc)
- Additions or improvements that do not become a permanent
part of the property or support commerical use of the property
- Self-Help projects
- Major rehabilitation or major remodeling (e.g. structural damage
repairs, room additions, landscaping, etc)
- Self-Help projects
Time Frame for Renovations 9 months 6 months 6 months
203(k) Consultant Required when
a) repairs or renovations exceed $15,000 or
b) any structural work is required
Required Optional
Draw Requirements Funds will be dispersed only when renovation work has been
completed and inspected. All required documentation must be
received by Pennymac prior to payment. Before any
disbursements are made during the renovation period, a lien
waiver or a clear title report that releases all contractor and
supplier liens must be obtained.
The lender may fund up to 50% of the planned materials cost at
closing with an initial materials draw
A 10% holdback is required on each release from the rehabilitation
escrow account
Draw documents are required for any funds released prior to
delivery to Pennymac. The lender must obtain an executed form
HUD-9746-A Draw Request Section 203(k) from the 203(k)
Consultant, requesting the release of escrow funds for completed
Work Items.
The lender may fund up to 50% of the planned materials cost at
closing with an initial materials draw
A 10% holdback is required on each release from the rehabilitation
escrow account
Draw documents are required for any funds released prior to
delivery to Pennymac. The lender must obtain an executed form
HUD-9746-A Draw Request Section 203(k) from the 203(k)
Consultant (or from the Borrower when there is no 203(k)
Consultant) requesting the release of escrow funds for completed
Work Items.
The lender may fund up to 50% of the planned materials & labor
costs at closing only when the contractor cannot defer payment or
the payment is for material costs incurred prior to construction
Holdback is not required
Maximum Draw Requests No maximum number of draw requests Maximum of 5 draw requests (4 intermediate and 1 final) Maximum of 2 draw requests (per contractor)
Contingency Reserves Contingency reserve equal to minimum of 10% of the total costs of
the repairs and renovation work is required
Structures with actual age < 30 Years:
- Discretionary: No minimum, max 20%
- Required when evidence of termite damage: Min 10%, Max 20%
Structures with actual age >= 30 years:
- Required: Min 10%, Max 20%
- When utilities are not operable as referenced in the Work Write-
Up: Min 15%, Max 20%
Optional
Mortgage Payment
Reserves
Mortgage payment reserves can be used for principal residence
properties when the property cannot be occupied during the
renovation period.
Mortgage payments that come due during the renovation period
may be escrowed - at the borrower's request - up to a maximum
of 6 months payments of principal, interest, taxes, insurance, and
any association dues.
Mortgage payment reserves can be used when the property
cannot be occupied during the renovation period.
Mortgage payments that come due during the period which the
property cannot be occupied may be escrowed up to a maximum
of 6 months of mortgage payments of principal, interest, taxes,
insurance, and any association dues. The number of mortgage
payments cannot exceed the completion time frame (as per the
Rehabilitiation Loan Agreement).
Mortgage payment reserves are not allowed
Appraisals & Lender Approval
Appraisal Requirement Full appraisal required. "As completed" value required. Purchase
Full appraisal required. After
improved value required.
Refinance
Full appraisal required. The
appraiser must provide the as-is
value in the body of the report. If
the appraiser refuses to provide
the as-is value within the as-
repaired report, Pennymac will
require both an as-is appraisal
and as-repaired appraisal. The
existing debt plus fees may not
be used to determine the
Adjusted As-Is Value.
Purchase
Full appraisal required. After
improved value required.
Refinance
Full appraisal required. The
appraiser must provide the as-is
value in the body of the report. If
the appraiser refuses to provide
the as-is value within the as-
repaired report, Pennymac will
require both an as-is appraisal
and as-repaired appraisal. The
existing debt plus fees may not
be used to determine the
Adjusted As-Is Value.
Project Completion Form 1004D (Appraisal Completion Report) required Fannie Mae Form 1004D or Freddie Mac Form 442 or HUD
Consultant Final Inspection required
Fannie Mae Form 1004D or Freddie Mac Form 442 or HUD
Consultant Final Inspection required
Lender Approval Must be approved by Pennymac prior to delivering FNMA
HomeStyle loans
Must be approved by Pennymac prior to delivering FHA 203(k)
loans
Must be approved by Pennymac prior to delivering FHA 203(k)
loans
Recourse Loans retain recourse if delivered before the improvements are
completed
None None
Footnotes *Please note that this is for informational purposes only. For full product details, please refer to the Pennymac Product Profiles, Fannie Mae Selling Guide, and FHA Handbook.*
¹ If LTV > 95% and is a purchase, borrower must be a first time home buyer unless combined with HomeReady. If LTV > 95% and is a Rate & Term Refinance, existing loan must be owned or securitized by Fannie Mae
² The maximum CLTV when secondary financing is provided by private individuals and other organizations is 110% of the After Improved Value. No maximum CLTV when the secondary financing is provided by a government entity or
family member
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programs may not be available in all states. Minnesota: This is not an offer to enter into an agreement and an offer may only be made pursuant to Minn. Stat. §47.206 (3) & (4). Licensed New York Mortgage Loan Servicer - This site is not authorized by the New York State
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intended for consumer use. This is not an offer for extension of credit or a commitment to lend or to purchase loans. Other restrictions may apply. Terms are subject to change without notice at the sole discretion of PennyMac Corp. All rights reserved. (01-2022)
APPENDIX A. MAXIMUM LOAN AMOUNT CALCULATIONS
Example #1: 203(k) Standard, Purchase, SFR, High Cost Area Example #2: 203(k) Limited, Refinance, SFR, Low Cost Area
Example #3: HomeStyle, Purchase, 2nd Home
Assumptions
Purchase Price = $300,000
Inducements to Purchase = $0
As-Is Value = $305,000
Financeable Repair and Improvement Costs = $65,000
Financeable Mortgage Fees = $3,000
Financeable Contingency Reserves = $12,000 (Structural age >= 30 Yr, max 20%)
Financeable Mortgage Payment Reserves = $8,000 (4 months x $2,000 PITI)
After Improved Value = $350,000
Assumptions
As-Is Value = $250,000
Existing Debt on Property Being Refinanced = $230,000
Fees Associated with New Loan = $4,000 (includes closing costs & prepaid items)
Financeable Repair and Improvement Costs = $25,000
Financeable Mortgage Fees = $1,500
Financeable Contingency Reserves = $0 (Optional)
Financeable Mortgage Payment Reserves = $0 (Standard 203k only)
After Improved Value = $270,000
Assumptions
Purchase Price = $400,000
Financeable Repair and Improvement Costs = $50,000
Financeable Mortgage Fees = $2,000
Financeable Contingency Reserves = $5,000 (min 10%)
Financeable Mortgage Payment Reserves = $0
As Completed Value = $455,000
Step 1. Find Adjusted As-Is Value (Purchase)
A) Purchase Price - Inducements to Purchase = $300,000 - $0 = $300,000
B) As-Is Value = $305,000
Adjusted As-Is Value (Purchase) = Lesser of A) or B) = $300,000
Step 2. Find Total Rehabilitation Cost
Total Rehabilitation Cost = Financeable Repair and Improvement Costs
+ Financeable Mortgage Fees
+ Financeable Contingency Reserves
+ Financeable Mortgage Payment Reserves (Standard 203k only)
Total Rehabilitation Cost = $65,000 + $3,000 + $12,000 + $8,000 = $88,000
Step 3. Find After Improved Value x 110% (100% for condos)
110% of the After-Improved Value = $350,000 x 110% = $385,000
Step 4. Find Maximum Loan Amount
A) Adjusted As-Is Value + Total Rehabilitation Cost = $300,000 + $88,000 = $388,000
B) 110% of the After Improved Value = $385,000
Maximum loan amount = [ Lesser of A) or B) ] x LTV
= [ 110% of the After Improved Value ] x LTV
= $385,000 x 96.5%
= $371,525
Step 5. Verify that Loan Amount does not exceed Nationwide Mortgage Limits
Step 1. Find Adjusted As-Is Value (Refinance)
A) As-Is Value = $250,000
B) Existing Debt + Fees Associated with New Loan = $230,000 + $4,000 = $234,000
Adjusted As-Is Value (Refinance) = Use A) since an as-is value was obtained*= $250,000
*Pennymac always requires an as-is value. The existing debt plus fees may not be used
to determine the Adjusted As-Is Value.
Step 2. Find Total Rehabilitation Cost
Total Rehabilitation Cost = Financeable Repair and Improvement Costs
+ Financeable Mortgage Fees
+ Financeable Contingency Reserves
+ Financeable Mortgage Payment Reserves (Standard 203k only)
Total Rehabilitation Cost = $25,000 + $1,500 + $0 + $0 = $26,500
Step 3. Find After Improved Value x 110% (100% for condos)
110% of the After-Improved Value = $270,000 x 110% = $297,000
Step 4. Find Maximum Loan Amount
A) Adjusted As-Is Value + Total Rehabilitation Cost = $250,000 + $26,500 = $276,500
B) 110% of the After Improved Value = $297,000
Maximum loan amount = [ Lesser of A) or B) ] x LTV
= [ Adjusted As-Is Value + Total Rehabilitation Cost ] x LTV
= $276,500 x 97.75%
= $270,278
Step 5. Verify that Loan Amount does not exceed Nationwide Mortgage Limits
Step 1. Total Renovation Costs
Total Renovation Cost = Financeable Repair and Improvement Costs
+ Financeable Mortgage Fees
+ Financeable Contingency Reserves
+ Financeable Mortgage Payment Reserves
Total Renovation Cost = $50,000 + $2,000 + $5,000 = $57,000
Step 2. Find Maximum Loan Amount
A) Purchase Price + Total Renovation Cost = $400,000 + $57,000 = $457,000
B) As Completed Value = $455,000
Maximum Loan Amount = [ Lesser of A) or B) ] x LTV
= [ As Completed Value ] x LTV
= $455,000 x 90%
= $409,500
