What This Combination Program Offers
You're looking at two Fannie Mae programs working together. CHOICERenovation lets you finance home improvements as part of your mortgage. GreenCHOICE offers reduced fees when those improvements make your home more energy-efficient or resilient.
The combination makes sense if you're buying a fixer-upper or refinancing to fund green improvements. You get renovation financing plus fee credits for making environmentally beneficial upgrades.
Say you're buying a 1960s ranch house for $300,000 that needs new windows, insulation, and HVAC upgrades. The completed value appraises at $380,000. You can finance up to $57,000 in energy improvements (15% of $380,000) and potentially qualify for reduced loan fees through the GreenCHOICE program.
How the 15% Rule Works
Your energy-efficient renovation costs cannot exceed 15% of the property's "as completed" appraised value. This is different from the purchase price or current value.
The appraiser looks at what the home will be worth after all renovations are finished. That completed value becomes your ceiling for calculating the 15% limit.
If your completed appraisal comes in at $400,000, you can finance up to $60,000 in qualifying green improvements. But remember, this 15% limit applies only to the energy-efficient portions of your renovation. Other improvements follow different CHOICERenovation limits outlined in [[Section 4607.7]].
Energy Report Requirements
Projects under $6,500 in total green improvement costs don't need an energy report. Anything over that threshold requires documentation proving the improvements will actually save energy or water.
The energy report must meet requirements in [[Section 4606.4]]. This typically means hiring a certified energy auditor or using approved software to model your home's current and projected energy performance.
There's an exception for renewable energy installations like solar panels. Instead of a traditional energy report, your appraiser can use tools like PV Value or Ei Value to document projected energy savings and demonstrate cost-effectiveness.
What Qualifies as Green Improvements
The improvements must enhance energy efficiency, water efficiency, health and safety, or resiliency and disaster prevention. This covers a wide range of projects.
Energy efficiency includes new windows, insulation, HVAC systems, LED lighting, and smart thermostats. Water efficiency covers low-flow fixtures, drought-resistant landscaping, and greywater systems.
Health and safety improvements might include air filtration systems, non-toxic materials, or mold remediation. Resiliency upgrades could be storm shutters, backup generators, or flood-resistant materials.
The key is that these improvements must be completed after your loan closes, not before. Pre-existing green features don't qualify for the fee credit.
Required Documentation
Your lender needs specific paperwork to process this combined loan type. Beyond standard CHOICERenovation documents, you'll need energy-related documentation.
For projects over $6,500, provide the energy report or alternative documentation showing projected savings. Keep contractor bids that clearly separate green improvements from other renovation work.
Your lender must deliver special data points to Fannie Mae identifying the loan as both a CHOICERenovation and GreenCHOICE mortgage. This happens behind the scenes but affects your loan's delivery requirements.
How Renovation Funds Are Managed
All renovation money goes into an escrow account or custodial account that your lender controls. You don't get a lump sum upfront.
Funds are released as work progresses and inspections confirm completion. This protects both you and the lender by ensuring money goes toward actual improvements.
Any leftover funds after all renovations are complete must either pay down your loan balance or fund additional approved improvements. You can't pocket the difference.
Timing Requirements Matter
All renovations must be completed by the completion date specified in your loan documents. This includes both the green improvements and any other renovation work.
Missing this deadline can jeopardize your loan and the fee credits. Plan your project timeline carefully and build in buffer time for delays.
The completion date is typically 6 months from closing, but can vary based on project scope and local factors.
Common Complications
The biggest challenge is accurately estimating costs upfront. If your green improvement costs exceed 15% of the completed value, you'll need to scale back or pay the overage out of pocket.
Contractor change orders can also create problems. If your green improvements end up costing more than projected, you might lose eligibility for the fee credits.
Another issue is mixing green and non-green improvements in the same project. Your contractor bids need to clearly separate qualifying improvements from general renovations.
Some borrowers assume any home improvement qualifies for green credits. Only specific energy, water, health, safety, and resiliency improvements count. Cosmetic upgrades like new flooring or paint don't qualify.
References
For the official guidelines, see 4607.16: CHOICERenovation® Mortgages combined with GreenCHOICE Mortgages® and credit for Credit Fees in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Freddie Mac Guideline Text
This section contains requirements related to:
Delivery requirements for CHOICERenovation
®
Mortgages
Special requirements when CHOICERenovation Mortgages are combined with GreenCHOICE Mortgages
®
(a)
Delivery requirements for CHOICERenovation Mortgages
Section 6302.43
for special delivery requirements for CHOICERenovation Mortgages.
(b)
Special requirements when CHOICERenovation Mortgages are combined with GreenCHOICE Mortgages
When CHOICERenovation Mortgage proceeds finance renovations completed after the Note Date to improve the energy and/or water efficiency, the health and safety and/or the resiliency and preventiveness of the Mortgaged Premises, the CHOICERenovation Mortgage may be eligible for the credit for Credit Fees for GreenCHOICE Mortgages (see
, and
Exhibit 19A, Credit Fee Cap Eligibility Criteria
), provided the following requirements are met:
Except as stated below, the requirements in
Section 4606.3(a)
for GreenCHOICE Mortgages must be met for the subject Mortgage. This includes, but is not limited to:
The cost of the financed renovations to improve the energy and/or water efficiency, the health and safety and/or the resiliency and preventiveness of the Mortgaged Premises must not exceed 15% of the “as completed” appraised value of the Mortgaged Premises.
Note: In all cases, the maximum financed renovation costs must comply with the requirements in
Section 4607.7
, as applicable.
Section 4606.1(b)
with an aggregate cost of less than or equal to $6,500 may be completed without obtaining an energy report. If the aggregate cost should exceed $6,500, an energy report or alternative documentation in lieu of an energy report meeting the requirements in
Section 4606.4
must be obtained and retained in the Mortgage file.
Section 4606.4(c)
, when proceeds are used to finance renewable energy sources, may apply so long as the appraiser documents the projected income by utilizing PV Value, Ei Value or a similar tool as referenced in
Section 5601.4
, and that the cost effectiveness has been demonstrated
All renovations, including renovations to improve the energy and/or water efficiency, the health and safety and/or the resiliency and preventiveness of the Mortgaged Premises, must be completed by the Completion Date
The renovation funds are deposited into a completion escrow account or Custodial Account for Renovation Funds (as described in
Sections 4607.11
and
4607.12
), as applicable, and
If the CHOICERenovation Mortgage is current, any funds remaining in the completion escrow account or Custodial Account for Renovation Funds, as applicable, after the costs of all renovations have been paid to the appropriate parties either must be used to reduce the UPB or may be used for additional renovations, as described in
Section 4607.11(c)
For CHOICERenovation Mortgages that are eligible for the credit for Credit Fees for GreenCHOICE Mortgages pursuant to this Section 4607.16(b), in addition to meeting the special delivery requirements for CHOICERenovation Mortgages in
Section 6302.43
, the Seller must deliver the ULDD Data Point(s) for GreenCHOICE Mortgages specified in
Section 6302.23
.
