What CHOICERenovation Mortgages Are For
CHOICERenovation mortgages help you buy a home that needs work or refinance your current home to fund major improvements. These aren't typical construction loans — they're conventional mortgages that include renovation costs in the loan amount.
You can use these loans in two situations. First, when buying a property that needs renovations. The loan covers both the purchase price and the cost of improvements. Second, when you already own your home and want to refinance to fund renovations without taking cash out.
Say you're buying a house for $300,000 that needs $50,000 in kitchen and bathroom updates. A CHOICERenovation mortgage could finance the full $350,000, letting you complete the work without a separate construction loan.
Completion Timeline Requirements
The renovation timeline depends on which program you choose. Standard CHOICERenovation mortgages give you 450 days to complete all work. CHOICEReno eXPress mortgages, designed for simpler projects, allow only 180 days.
These deadlines start from your loan's note date — the day you officially close on the mortgage. The clock starts ticking immediately, so you need your contractor lined up and permits ready before closing.
If unexpected delays occur, you can request an extension. Weather problems, supply chain issues, or permit delays might qualify. You can get up to 90 additional days for standard CHOICERenovation loans or 30 days for eXPress loans. But you must stay current on your mortgage payments and can't have been 30 days late more than once during the renovation period.
How Property Value Gets Determined
The loan amount calculation works differently than regular mortgages because you're borrowing against the home's future value after renovations.
For purchase transactions, your loan is based on the lower of two amounts: the purchase price plus total renovation costs, or the appraised value of the completed property. This protects both you and the lender from over-borrowing.
Here's how this works in practice. You're buying a $250,000 fixer-upper and planning $75,000 in renovations. The appraiser determines the completed home will be worth $350,000. Your loan would be based on $325,000 (purchase price plus renovation costs) since that's lower than the $350,000 completed value.
For refinances, the calculation is simpler. Your loan amount is based solely on the appraised value of the completed property.
Refinance Restrictions and Title Requirements
CHOICERenovation refinances must be "no cash-out" transactions. This means you can't take money out beyond what's needed for the renovations and standard refinance costs like paying off your existing mortgage.
You must have owned the property for at least six months before applying, with some exceptions that mirror standard cash-out refinance rules [[4301.5(b)]]. This prevents people from quickly flipping properties using these renovation loans.
Even if you own your home free and clear, financing renovations through CHOICERenovation counts as a no-cash-out refinance as long as the money only goes toward eligible improvements.
Loan-to-Value Limits Apply
CHOICERenovation mortgages follow the same loan-to-value limits as regular Fannie Mae loans [[4203.1(b)]]. For most borrowers, this means you can finance up to 97% of the completed property value on a primary residence, though your specific limit depends on factors like credit score and down payment.
The key difference is that your LTV calculation uses the after-renovation value, not the current condition. This often allows you to borrow more than you could with a traditional mortgage on the same property in its current state.
Your debt-to-income ratio, credit score, and other standard mortgage requirements still apply. The renovation aspect doesn't change basic loan qualification standards.
What Could Trip You Up
Timing creates the biggest challenges with these loans. You need detailed renovation plans, contractor bids, and permits ready before closing. Any delays in starting work eat into your completion deadline.
Cost overruns can derail your project. If renovations cost more than originally estimated, you can't increase the loan amount. You'll need to cover additional costs out of pocket or scale back the work.
Contractor problems cause major headaches. If your contractor disappears or does poor work, you're still responsible for completing renovations by the deadline. Choose contractors carefully and verify they're licensed and insured.
Payment delays can jeopardize extensions. If you fall behind on mortgage payments during renovations, you lose eligibility for completion date extensions. This could force you to finish work faster than planned or face potential default.
Required Documentation
Your lender needs detailed renovation plans before closing. This includes architectural drawings for major changes, contractor bids for all work, and permits for projects that require them.
The appraiser must provide a detailed scope of work and estimated completion value. This appraisal differs from standard home appraisals because it values the property "as completed" rather than in current condition.
You'll need proof of contractor licensing and insurance. Some lenders require the contractor to be approved before closing. Get these documents early in the process.
During renovations, you'll submit progress reports and receipts to release funds from the renovation escrow account. Keep detailed records of all work and expenses.
References
For the official guidelines, see 4607.4: General eligibility requirements for CHOICERenovation® Mortgages 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:
Completion Date and Settlement Date requirements
Mortgage purpose
Maximum loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios
(a)
Completion Date and Settlement Date requirements
(i)
Completion Date requirements
Renovations to the Mortgaged Premises must be completed by the Completion Date as follows:
450 days after the Note Date for CHOICERenovation
®
Mortgages that are not CHOICEReno eXPress
®
Mortgages
180 days after the Note Date for CHOICEReno eXPress Mortgages
(ii)
Completion Date extension
The Seller may request from Freddie Mac a Completion Date extension when circumstances outside the Borrower’s or contractor’s control prevent completion of the renovations by the Completion Date. The total days requested for the extension(s) must not exceed 90 days.
To be eligible for a Completion Date extension, the Borrower must not:
Be delinquent at the time of the Seller’s extension request, and
Have been 30 days delinquent more than once during the renovation period
To request a Completion Date extension, the Seller must submit to Loan Status Hub
®
documentation supporting the reason for the delay (e.g., weather, supply chain issues, permit delays, etc.). If Freddie Mac grants the extension, the Completion Date may be extended:
A maximum of 90 days for CHOICERenovation Mortgages
A maximum of 30 days for CHOICEReno eXPress Mortgages
If the extension request is granted, Freddie Mac will provide the extended Completion Date through Loan Status Hub.
(iii)
Settlement Date requirements
For CHOICERenovation Mortgages with Settlement Dates after completion of renovations (see
Section 4607.1(a)
), the Settlement Date must occur no more than 450 days after the Note Date.
(b)
Mortgage purpose
CHOICERenovation Mortgages must be either purchase transaction or “no cash-out” refinance Mortgages with proceeds used as follows:
Purchase transaction Mortgages
: Proceeds may be used to purchase the Mortgaged Premises and to pay for the eligible renovations described in
“No cash-out” refinance Mortgages
: Proceeds may be used as described in
Section 4301.4
, except that proceeds may not be used to disburse cash out to the Borrower. A CHOICERenovation Mortgage secured by a property previously owned free and clear by the Borrower is considered a “no cash-out” refinance Mortgage if the proceeds are used only to finance the eligible renovations described in
Section 4607.6
.
At least one Borrower must have been on the title to the subject property for at least six months prior to the Note Date unless one of the exceptions to this title requirement that are specified in the cash-out refinance Mortgage requirements of
Section 4301.5(b)
applies.
(c)
Maximum LTV/TLTV/HTLTV ratios
Each CHOICERenovation Mortgage must have maximum LTV/TLTV/HTLTV ratios that comply with the LTV/TLTV/HTLTV ratios in
Section 4203.1(b)
and any other applicable LTV/TLTV/HTLTV ratio requirement for the specific Mortgage Product or offering.
(d)
Determining value
The value used to determine the LTV, TLTV and HTLTV ratios must be established as follows:
“No cash-out” refinance
Value is the lesser of:
The purchase price of the Mortgaged Premises prior to the renovations plus the total renovation costs, or
Appraised value of the Mortgaged Premises, as completed
Value is the appraised value of the Mortgaged Premises, as completed.
(e)
Secondary financing
Secondary financing must comply with Guide requirements for the specific Mortgage Product or offering.
