FHA 203(k) Loans vs. Freddie Mac Renovation Loans

203(k) Loans and Freddie Mac Renovation Loans Compared

While 203(k) loans may be the most popular home renovation and purchase loan on the market, the Fannie Mae HomeStyle loan is also growing in popularity. However, these two loans aren’t the only one-and-done home purchase/refinance and renovation loans out there. Fortunately for borrowers, Freddie Mac also offers the Freddie Mac Renovation Loan. In this article, we’ll review the basics of Freddie Mac Renovation Loans and compare them to the other purchase and renovation loans available to borrowers, including the FHA 203(k) loan.

What do 203(k) Loan and Freddie Mac Renovation Loans Have in Common?

203(k) loans and Freddie Mac Renovation Loans have more than a few things in common. In general, both of these types of mortgages have an extremely similar purpose: allowing borrowers to purchase (or refinance) and renovate a home with one, single mortgage loan. In addition, both 203(k) and Freddie Mac Renovation Loans both offer terms of 15 and 30 year years to borrowers. Specifically, Freddie Mac Renovation Loans offer 15, 20, and 30 year terms, while 203(k) loan lenders can offer a term of any length between 15 and 30 years (though the vast majority of 203(k) loans are either 15-year or 30-year mortgages and not any number in between).

Also, just like 203(k) loans, renovation loans from Freddie Mac can be used to purchase and rehabilitate properties with between 1 and 4 units. In theory, a Freddie Mac Renovation Loan borrower could purchase a duplex, triplex, or quadplex, repair it, and live in one unit while renting out the others. However, they would not have to live there to be eligible for the loan. In contrast, to be eligible for the loan, a 203(k) borrower would have to live on the property.

What are the Major Differences Between 203(k) Loans and Freddie Mac Renovation Loans?

In addition to having a certain number of similarities, 203(k) loans and Freddie Mac Renovation Loans also have a few substantial differences. First, just like Fannie Mae HomeStyle loans, Freddie Mac Renovation Loans can be used for both second residences and investment homes. In contrast, FHA 203(k) loans can only be used for primary residences— and, in some limited cases, may be used for FHA-approved second homes (though this is somewhat rare).

In addition, much like 203(k) loans, Freddie Mac Renovation Loans require a borrower to get a home appraisal before they can be approved for financing. This is to ensure that the home’s purchase price is equal to or less than the true market value of the home. Otherwise, both the borrower and the lender would be taking on an undue amount of risk— and the lender could have significant trouble recouping their funds if they needed to foreclose on the home and sell it on the open market.

Overall, the Freddie Mac Renovation Loan is not a particularly popular program— and there are not too many lenders who offer it. However, if a 203(k) or Fannie Mae HomeStyle loan isn’t the right choice for you, it could provide the financing you need to purchase or refinance and rehabilitate a property.


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