What HomeStyle Refresh Actually Does
HomeStyle Refresh fills a specific gap in renovation financing. You want to buy a house that needs a new kitchen, or you own a home that needs energy-efficient windows. Traditional mortgages won't include renovation costs. A full HomeStyle renovation loan requires contractors, detailed plans, and months of complexity. HomeStyle Refresh sits in the middle.
The program works for smaller projects. Think bathroom updates, new flooring, solar panels, or fixing storm damage. You get one loan that covers both the house purchase (or refinance) and the renovation costs. The key word is "smaller" — you can finance up to 15% of the home's completed value for improvements.
Say you're buying a $400,000 house that needs $40,000 in kitchen and bathroom updates. The appraiser determines the completed value will be $450,000. You can finance up to $67,500 in improvements (15% of $450,000). Your $40,000 renovation fits comfortably within that limit.
How the Numbers Work
The math depends on whether you're buying or refinancing. For purchases, your loan-to-value ratio gets calculated using the lower of three numbers: the completed appraised value, the purchase price plus improvement costs, or the purchase price plus any PACE debt you're paying off.
Here's a purchase example: You're buying a $300,000 house and planning $30,000 in improvements. The appraiser says the completed value will be $340,000. Your LTV calculation uses $330,000 (purchase price plus improvements) because that's lower than the $340,000 appraised value. If you put down 10%, your loan amount would be $297,000.
For limited cash-out refinances, the LTV uses the completed appraised value. You can also pay off existing debt that financed energy improvements, like solar panel loans or PACE assessments. The debt must be paid in full — no partial payoffs allowed.
What Projects Qualify
The eligible improvements list covers most common home updates. Kitchen and bathroom renovations qualify. So do energy upgrades like new HVAC systems, insulation, or solar panels. You can add outdoor structures like decks, pools, or patios if local zoning allows.
Disaster-related work gets special attention. If your area experienced flooding, wildfires, or storms, you can finance repairs and future protection measures. This includes foundation retrofitting for earthquakes, storm surge barriers, or clearing fire-prone vegetation.
Environmental hazard remediation qualifies too. Asbestos removal, lead paint abatement, mold remediation, and radon mitigation all count as eligible improvements. You can even add or renovate an accessory dwelling unit.
Manufactured homes can use the program, but structural changes aren't allowed. Cosmetic updates and mechanical system improvements work fine.
Required Documentation
Your lender needs detailed plans and specifications for all proposed work. This doesn't mean architect-level drawings for a bathroom remodel, but you need clear descriptions of what's being done and how much it costs.
The appraiser must receive copies of all renovation plans before completing the appraisal. They need this information to determine the "as completed" value. Without proper documentation, the appraiser can't do their job.
You'll also need contractor estimates or bids showing the scope and cost of work. If you're doing some work yourself, document the material costs and labor involved. The lender uses this information to set up the escrow account that holds renovation funds.
For energy-related debt payoffs, provide documentation of the existing loans or PACE assessments. The lender needs to verify what's being paid off and confirm the improvements were actually made.
The Escrow and Timeline Process
Your lender sets up a completion escrow account to hold the renovation funds. At closing, they can release up to 50% of the total renovation budget as an initial draw. This money can cover permits, design fees, and materials needed to start work.
All improvements must be completed within 180 days of closing. This timeline is firm. If your project runs longer, the lender must contact Fannie Mae through Loan Quality Connect to explain the delay and get approval for an extension.
When work finishes, you need a completion certification on Form 1004D. This document confirms that all improvements were completed according to the original plans. If you made changes during construction, the appraiser notes any impact on the home's value.
The lender also obtains a title update to ensure no mechanic's liens were filed during construction. In some states, contractor liens can take priority over your mortgage, so this step protects everyone involved.
What Can Trip You Up
The 180-day completion deadline catches many borrowers off guard. Contractor delays, permit issues, or material shortages can push projects past this limit. Plan conservatively and build buffer time into your schedule.
Change orders require formal documentation. If you decide to upgrade the countertops or add extra electrical work, you must submit Form 1200 or similar paperwork before proceeding. Undocumented changes can create problems at completion.
Your lender cannot transfer servicing during the renovation period. If you prefer a specific servicer, make sure your lender plans to keep the loan until work completes. This restriction protects the escrow management process.
The 15% improvement limit is based on completed value, not purchase price. In hot markets where appraised values exceed purchase prices significantly, you might have more renovation budget than expected. In declining markets, the opposite could happen.
Manual underwriting has a 45% debt-to-income limit instead of the usual 36%, but only if you meet all other criteria for the higher ratio. Don't assume you automatically qualify for the higher DTI just because you're doing improvements.
References
For the official guidelines, see B5-3.3-01: HomeStyle Refresh for Improvements on Existing Properties in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties (12/10/2025)
Eligible Improvements
Calculating LTV and Maximum Renovation Amount
Manual Underwriting
Uniform Appraisal Dataset (UAD) 3.6 Policy
Overview
HomeStyle Refresh provides borrowers with a financing option for smaller-scale home improvements, including:
energy- or water-efficiency upgrades,
environmental remediation,
disaster preparedness or resiliency improvement, or
repairs needed due to a natural or environmental disaster of an existing property.
A lender does not need special approval to deliver HomeStyle Refresh loans to Fannie Mae. These loans are delivered with recourse, which may be removed once the lender provides proof of completion and the loan remains current.
A lender may deliver a HomeStyle Refresh loan with eligible improvements as soon as the loan is closed. The eligible improvements do not have to be completed when the mortgage is delivered to Fannie Mae.
Product Eligibility
Improvements are permitted on existing properties in conjunction with all standard Guide products and features including, but not limited to:
high-balance loans,
Community Seconds,
loans with deed restrictions (including programs that allow below market rate mortgages),
down payment assistance programs,
HomeReady loans, and
Community Land Trusts.
HomeStyle Refresh loans are subject to the applicable LTV, CLTV, and HCLTV ratios for purchase and limited cash-out refinance transactions found in the
. Improvements cannot be financed in the loan amount of a high LTV refinance loan.
Note: Improvements are permitted on a cash-out refinance, however the transaction is not considered a HomeStyle Refresh loan. All standard cash-out refinance policies apply.
Eligible Property and Occupancy Types
All one- to four-unit existing properties are eligible for HomeStyle Refresh. All property types are eligible. Manufactured homes are eligible provided the improvements do not include structural changes.
All occupancy types are permitted.
Eligible Improvements
The HomeStyle Refresh program may be used to make small-scale improvements and renovations to an existing property, such as:
kitchen or bathroom updates;
construction of outdoor buildings and structures when allowed by local zoning regulations, for example swimming pools, decking, screening and porch, and patio additions;
adding or renovating an accessory dwelling unit;
improvements or repairs related to disaster damage or improvements to protect the property from future disaster, such as
storm surge barriers,
foundation retrofitting for earthquakes,
hazardous brush and tree removal in fire zones, or
retaining walls to address mud or water flows.
environmental hazard damage repairs or resiliency improvements, including asbestos, lead, mold, and radon; or
energy- or water-efficiency improvements.
Change Requests
Before approving any change request a borrower wants to make to the original plans and specifications, the lender must require the borrower to submit a HomeStyle Change Order Request (Form 1200) or a substantially similar document, that provides a detailed description of the
change(s),
cost of the change(s), and
estimated completion date(s).
Calculating LTV and Maximum Renovation Amount
Purchase Transactions: In a purchase transaction, the proceeds can be used to finance the acquisition of the property and the cost of the improvements or the amount to payoff PACE debt. The LTV ratio is determined by dividing the original loan amount by the lesser of
the “as completed” appraised value of the property
the sum of the purchase price of the property plus the cost of the improvements, or
the sum of the purchase price plus the total amount of PACE debt to be paid off.
Limited Cash-out Refinance Transactions: When a loan is originated as a limited cash-out refinance, the loan must meet all of the standard requirements for limited cash-out refinances (as described in
).
Proceeds may also be used to pay off an existing PACE loan or other debt (secured or unsecured) that financed energy-related improvements. The standard cash back allowance of the greater of 1% of the loan amount or $2,000 is permitted on these loans.
For limited cash-out refinance transactions, the LTV ratio is determined by dividing the original loan amount by the “as completed” appraised value of the property when the mortgage is being delivered prior to the completion of the improvements. If the appraisal was completed after the completion of the improvements, then the LTV ratio is determined by dividing the original loan amount by the appraised value of the property.
There is no minimum dollar amount for the improvements; the maximum dollar amount depends on the type of HomeStyle Refresh activity and the transaction, described in the table below
Renovation of an existing property
For purchases or limited cash-out refinances up to 15% of the “as completed” appraised value of the property.
Payoff of non-PACE secured or unsecured debt that financed energy-related improvements
For limited cash-out refinances up to 15% of the appraised value of the property. The improvement debt must be paid off in full. Partial payoffs are not permitted.
Payoff of existing PACE loan
For purchases or limited cash-out refinances: all outstanding PACE debt may be paid off up to the maximum allowable LTV for the transaction and occupancy type. The PACE loan must be paid off in full. Partial payoffs are not permitted.
The lender is responsible for
ensuring that the appraiser has been provided with a copy of all plans and specifications proposed for the renovation project,
managing the completion escrow account in which improvement funds are held, and
monitoring the completion of the HomeStyle Refresh improvement work.
The lender must establish a completion escrow for incomplete improvements. The improvements must be completed no later than 180 days from the date of the mortgage note. For requirements related to the completion of the postponed improvements, including escrow accounts, disposition of funds after work completion, and title reports, see the applicable table in
.
In the event a renovation project exceeds 180 days, the lender must submit this information to Loan Quality Connect to describe the circumstances resulting in the delay and determine potential remedies. Recourse shall remain until proof of completion has been provided. If a loan experiences a serious delinquency (120+ days) while under recourse, the loan will be subject to repurchase.
The lender may fund up to 50% of the total planned renovation costs at closing with an initial draw. A portion of the initial draw may be used to pay for permits, architect fees, and design or planning expenses that were incurred during the initial part of the project.
The lender must maintain a copy of all documentation in the individual loan file that supports the improvement work, such as the “as completed” appraisal, home improvement contract, certification of completion, and title insurance endorsements or updates (if applicable).
Note: Lenders may not transfer servicing on HomeStyle Refresh loans during the renovation period.
Appraisal Requirements
All HomeStyle Refresh loans require an appraisal based on an interior and exterior property inspection and must be completed on the appropriate form depending on the property type. When the loan is being delivered prior to the completion of the improvements, appraisers must determine the “as completed” value of the property subject to the improvements being completed.
Following completion of the renovation work, the lender must obtain a certification of completion stating the renovation was completed in accordance with the submitted plans and specifications. The certification must be documented on the Appraisal Update and/or Completion Report (Form 1004D). The 1004D must confirm all "subject to" items listed on the appraisal were completed. If deviations have been made to the initial plans, the appraiser must note any impact to the appraised value. A copy of the Completion Report must be submitted through Loan Quality Connect to confirm completion.
Title and Insurance Updates
The lender must obtain a title update with the renovation completion date before issuing the final funds to ensure that Fannie Mae's first lien priority remains in place and confirms that no mechanic's or materialmen's liens exist.
When the property is located in a state in which contractors', subcontractors', or materialmen's liens have priority over mortgage liens, the lender must obtain all necessary lien releases or take any other actions that may be required to ensure title to the property is clear of all liens and encumbrances.
The lender must also retain in the loan file a certification regarding the adequacy of the property insurance following completion of the renovation. The certification must confirm the coverage has been increased, if necessary, to comply with Fannie Mae's standard property and flood insurance requirements.
Special Feature Code
The lender must report Special Feature Code 892 when delivering a loan that meets the HomeStyle Refresh requirements.
Manual Underwriting
For loans involving improvements that are underwritten manually, a maximum debt-to-income ratio of 45% is allowed if the transaction satisfies all criteria in the
for a 45% DTI ratio on a manually underwritten loan. All other underwriting requirements, such as the down payment, credit score, and reserve requirements, are identical to those for a similar transaction with a maximum DTI ratio of 36%.
Uniform Appraisal Dataset (UAD) 3.6 Policy
Lenders using UAD 3.6 must follow the requirements in the .
SEL-2020-07 SEL-2019-07
