At a glance
- Backed by
- Fannie Mae
- Covers
- Price or balance + improvements
- Occupancy
- Any
Educational overview, not a loan offer. Requirements vary by lender and borrower.
Overview
Fannie Mae's HomeStyle Renovation loan finances the purchase or refinance of a home plus the cost of improvements, based on the value after the work is complete.
Unlike some government options, it can be used for primary residences, second homes and investment properties, and for a wide range of improvements.
For smaller projects, Fannie Mae's HomeStyle Refresh, available for applications since March 31, 2026, finances limited improvements, disaster repairs and resiliency upgrades such as storm protection, for primary residences, second homes and investment properties.
How a HomeStyle Renovation loan works
HomeStyle Renovation is a conventional mortgage that Fannie Mae buys, with the renovation budget built into the loan. Instead of sizing the loan to the house as it stands, the lender orders an appraisal of the "as completed" value: what the home should be worth once the planned work is finished. That value, together with the purchase price and the contractor's bids, sets how much can be borrowed.
At closing, the money for the work is not handed to you as cash. It is deposited in a renovation escrow account that the lender or its agent manages, and contractors are paid in stages as work is finished and inspected. Fannie Mae allows part of the budget to be paid out at closing for early costs such as permits and design fees. When the project is done, the appraiser confirms completion, the lender updates the title to make sure no contractor liens were filed, and the escrow is closed out.
See also
Who HomeStyle can fit
HomeStyle tends to fit buyers and owners whose plans go well beyond paint and carpet, and who want one conventional loan instead of a purchase loan plus a separate improvement loan.
It is usually a poor match for small jobs that savings or Fannie Mae's smaller HomeStyle Refresh option can cover, and for anyone planning to demolish the house and rebuild.
Situations where HomeStyle comes up:
- A buyer who finds a dated house in the right location and wants to finance the purchase and a kitchen, bath or systems overhaul together.
- An owner who wants to add space, such as an accessory unit, a garage or a pool, where local zoning allows it.
- An owner of a one-unit second home or rental who wants to upgrade it, which FHA's 203(k) program generally does not allow.
- A buyer of a new home the builder left nearly finished, who needs to complete items like flooring, cabinets or trim.
HomeStyle eligibility, transaction types and lender rules
Borrowers must meet Fannie Mae's standard conventional requirements for credit, income, assets and debt, and the loan cannot exceed the conforming loan limit that applies to the property. The file is underwritten on the full loan amount, renovation included, so the larger balance and its payment have to fit your budget.
Two transaction types are allowed: a purchase, or a limited cash-out refinance that pays off the existing mortgage and funds the work. HomeStyle can be paired with HomeReady on an eligible primary residence, and the stricter rule of the two applies wherever they differ.
Lenders need a special Fannie Mae approval to sell these loans before the work is complete, and many add their own requirements for credit, contractors or project size. That is why availability and details differ from one lender to the next.
Down payment, equity and the as-completed value
For a purchase, Fannie Mae measures the loan against the lower of two figures: the purchase price plus the renovation costs, or the appraised as-completed value. For a refinance, the loan is measured against the as-completed value alone. The maximum loan-to-value ratio comes from Fannie Mae's eligibility matrix and depends on occupancy, the number of units and other factors.
Fannie Mae also caps the renovation budget as a share of the home's value, with a lower cap for manufactured homes. As with any conventional loan, private mortgage insurance is required when the loan is large compared with the value, which usually happens when the down payment or existing equity is small. If the appraiser concludes the finished home is worth less than expected, the lower figure controls. Your loan officer can run the numbers for your price, budget and appraisal.
Which homes HomeStyle can renovate
Fannie Mae allows HomeStyle on a one- to four-unit primary residence, a one-unit second home, a one-unit investment property, a manufactured home, and a unit in an eligible condo, co-op or planned unit development. A complete tear-down and rebuild is not eligible under any occupancy type.
- Condo and co-op units: work must stay inside the unit and be allowed by the association's documents or approved by it in writing.
- Manufactured homes: no structural changes, such as adding a garage, but kitchens, baths, windows, roofing and similar updates are allowed.
- Two- to four-unit homes: a contingency reserve for surprises is required, while it is optional on a one-unit home.
- Outdoor projects: accessory units, garages, recreation rooms and pools are allowed where zoning and building codes permit.
What HomeStyle can finance in one loan
The main benefits come from putting the house and the project under one conventional loan.
- One application, one closing and one monthly payment cover the home and the renovation, instead of layering a second loan on top.
- The as-completed appraisal lets planned improvements count toward the value the loan is measured against.
- It works for second homes and rentals as well as primary residences, and for many property types.
- Fannie Mae sets no minimum project size and no list of required repairs, so cosmetic upgrades and items such as a new pool can be included.
- Many soft costs, such as permits, plan reviews and inspection fees, can be financed as part of the renovation budget.
Draws, cost overruns and other HomeStyle tradeoffs
Renovation loans ask more of you up front than a standard mortgage. Before closing you need a contractor, a signed renovation contract, plans and specifications, and itemized bids, and the appraiser has to value a version of the house that does not exist yet. That preparation takes time, which can strain a purchase contract in a competitive market.
Costs beyond a standard loan can include inspection and draw-processing fees, title updates, and architect or consultant fees. If the work runs over budget, the loan cannot be increased to cover it, so the difference must come from you or, in some cases, the lender. Projects have a firm completion deadline, and you may be paying the mortgage on a home you cannot live in yet, unless payment reserves were built in, which Fannie Mae allows only for a primary residence that cannot be occupied during the work.
Talk it through with Ruben
Compared with other ways to fund a renovation
Which route fits depends on whether you are buying or already own, how much equity you have, and how much project oversight you are willing to accept. This table compares features, not cost. Not every lender offers each option, so ask your loan officer which ones the lender offers and how they compare for your project.
HomeStyle and FHA 203(k) both put the purchase or refinance and the project into one loan, with oversight of the work. A cash-out refinance or a HELOC gives you cash without contractor paperwork, but only if you already own the home and have enough equity, and the planned improvements do not raise the value the loan is based on.
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| Feature | HomeStyle Renovation | FHA 203(k) | Cash-out refinance | HELOC |
|---|---|---|---|---|
| Who sets the rules | Fannie Mae, plus lender | HUD, plus lender | Agency or lender, by program | Each lender |
| Occupancy | Primary, second home or rental | Primary residence | Varies by program | Varies by lender |
| Value used | As-completed appraisal | Value after improvements | Current value | Current value |
| Contractor bids and draws | Required | Required | Not required | Not required |
| Buy and renovate in one loan | Yes | Yes | No, owners only | No, owners only |
| New swimming pool | Allowed where zoning permits | Not allowed | Your choice | Your choice |
| Mortgage insurance | When equity is low | FHA premiums | Depends on program | None |
HomeStyle scenarios: an older house, a rental, an accessory unit
These sketches show where HomeStyle tends to come up. Every file is underwritten on its own facts.
- A couple buying an older house with a failing roof and a closed-in kitchen. The seller will not make repairs, so the purchase and the work are financed together, and the appraiser values the home as it will look afterward.
- An owner of a one-unit rental that needs new systems before it can be leased again. Because HomeStyle allows investment properties, the work can be rolled into a refinance of the existing loan.
- A family adding a detached accessory unit for a parent where the city permits one. The plans, permits and bids drive the budget and the as-completed value.
- A buyer closing on a new home the builder could not finish. HomeStyle covers the remaining flooring, cabinets and fixtures, because the house is nearly complete and the open items are not structural.
Plans, bids and the HomeStyle closing timeline
A HomeStyle file moves in a different order than a standard loan, because the project has to be defined before the appraisal can be ordered.
Contractor schedules, permit offices, appraisal timing and change orders all affect how long it takes, so leave slack in your plans and get any change in scope approved in writing before the work is done.
Typical steps:
- Talk with your loan officer about the scope and whether the lender offers HomeStyle for your property type.
- Choose a contractor. The choice is yours; the lender reviews licensing, experience and insurance and may ask for Fannie Mae's Contractor Profile Report.
- Have plans, specifications and itemized bids prepared by a contractor, renovation consultant or architect, and sign a renovation contract.
- The appraiser values the home as completed, based on those plans.
- At closing you sign a renovation loan agreement that sets the draw schedule and completion date.
- Draws, inspections, a completion report and a final title update follow before the escrow is closed.
HomeStyle myths about repairs, contractors and leftover money
A few assumptions trip up HomeStyle borrowers more than others.
- Myth: HomeStyle is only for repairs. Reality: Fannie Mae requires no particular repairs, so additions, pools and accessory units can qualify where zoning allows.
- Myth: The lender will recommend a contractor. Reality: Fannie Mae does not let the lender pick or refer you to a specific contractor; you choose, and the lender decides whether that contractor is acceptable.
- Myth: Leftover money comes back to me. Reality: Unused financed renovation or contingency funds generally reduce the loan balance or pay for added documented improvements.
- Myth: I can do the work and be paid for my time. Reality: A do-it-yourself option exists for one-unit homes, but Fannie Mae reimburses materials and documented contract labor, not your own labor.
- Myth: If bids come in high, the loan can grow. Reality: The loan amount is set at closing, and overruns are paid from your funds or the contingency reserve.
Common questions
14 questions
Can I do the renovation work myself with a HomeStyle loan?
Sometimes. Fannie Mae offers a do-it-yourself option for one-unit homes other than manufactured homes, limited to a modest share of the home's as-completed value. The lender must approve the planned work in advance and inspect larger items when they are finished. You can be reimbursed for materials and properly documented contract labor, but not for your own time, and the budget must still include full labor costs so a contractor could finish if you cannot. Other work is done by licensed contractors where state or local law requires a license.
What kinds of improvements can a HomeStyle loan cover?
Fannie Mae sets no list of required improvements and no minimum amount. Improvements generally need to be permanently attached to the home or land, and where zoning allows they can include an accessory unit, a garage or a swimming pool. A complete tear-down and rebuild isn't eligible.
How long do I have to finish a HomeStyle renovation?
The work must be finished within 15 months of closing. In rare cases, Fannie Mae may allow a limited extension of up to 18 months from closing, so it helps to plan the project schedule with your contractor before you apply.
Can I use HomeStyle on a condo or manufactured home?
Yes, with limits. For a condo or co-op unit, the work must stay inside the unit and be allowed by the association's rules or approved by it in writing. For a manufactured home, improvements can't include structural changes, such as adding a garage, but updates like kitchens, bathrooms, windows and energy-efficient heating and cooling are allowed.
HomeStyle Renovation or HomeStyle Refresh?
HomeStyle Refresh is Fannie Mae's option for smaller projects on an existing one- to four-unit home, such as kitchen or bath updates, energy or water upgrades, disaster repairs or storm protection, and it caps the improvements at a smaller share of the home's value. It works with a purchase or a rate-and-term refinance and any occupancy type. Larger projects use HomeStyle Renovation.
HomeStyle or FHA 203(k)?
Both combine the purchase or refinance and the renovation in one loan. HomeStyle is a conventional loan that can be used for a primary residence, a one-unit second home or a one-unit investment property, while a 203(k) is an FHA loan for a home you'll live in, with FHA's credit guidelines. HomeStyle also allows items a 203(k) doesn't, such as a new swimming pool.
What happens if the renovation costs more than the bids?
The loan amount is fixed at closing, and Fannie Mae does not allow it to be raised to cover overruns. A contingency reserve, required on two- to four-unit homes and optional on one-unit homes, can pay for necessary repairs that turn up once work begins, such as hidden water damage. Anything beyond that must come from your own funds or, in some cases, the lender. Firm bids and a realistic scope before closing are your main safeguard.
How does the contractor get paid?
Renovation money sits in an escrow account for your benefit, and the lender releases it in stages after inspections confirm the work. Under Fannie Mae's rules, payments go out as checks made out to you and the contractor jointly, or by wire to the contractor after you give written consent for each payment. Before the final payment, the lender collects lien waivers or a clear title report so no contractor or supplier can claim a lien on your home.
Who chooses the contractor for a HomeStyle loan?
You do. Fannie Mae does not allow the lender to choose your contractor or steer you to one, but the lender must be satisfied that your choice is qualified and experienced, holds the credentials your state requires, can finish the job financially and will indemnify you for damage its crew causes. The lender may ask the contractor to complete a Contractor Profile Report. Getting more than one bid helps you judge price and scope.
Can the loan cover my mortgage payments while I can't live in the house?
For a primary residence that cannot be lived in during the work, Fannie Mae allows a limited number of mortgage payments, including taxes and insurance, to be built into the renovation budget and held in escrow. Those funds can only be used for payments that come due while the home is unlivable. The option does not apply to second homes or rentals, so plan for those carrying costs, and remember you may be paying rent elsewhere in the meantime.
Can HomeStyle pay to finish a new home the builder didn't complete?
Yes, in a narrow case. Fannie Mae allows HomeStyle to finish a newly built home that is almost complete, when the remaining work is non-structural items the builder could not finish, such as flooring, cabinets, kitchen appliances, fixtures and trim. It is not a way to pay for building a house; construction from the ground up uses construction-to-permanent financing instead.
Is a HomeStyle loan based on the purchase price or the value after the work?
Both matter. On a purchase, Fannie Mae compares the loan with the lower of the purchase price plus renovation costs or the appraised as-completed value. On a refinance, it uses the as-completed value. If the appraiser concludes the finished home will be worth less than the price plus the budget, the lower figure controls how much can be borrowed, and you may need more cash or a smaller project.
Can I get cash back when I refinance with HomeStyle?
No. A HomeStyle refinance is a limited cash-out transaction, and Fannie Mae does not allow any cash to the borrower, not even the small amount a standard limited cash-out refinance can sometimes include. Money left in the renovation account after the work goes toward the loan balance or, with paid receipts, toward additional improvements. If you need cash for other goals, compare a standard cash-out refinance or a home equity loan.
Do I need mortgage insurance on a HomeStyle loan?
It follows the usual conventional rule. When the loan is large compared with the home's value, generally because the down payment or existing equity is small, private mortgage insurance is required. When HomeStyle is combined with HomeReady, HomeReady's mortgage insurance terms apply. Your loan officer can show whether your scenario would need it and how the cost would be figured for your loan amount, value and credit.
This page explains how this type of loan generally works. Programs, guidelines and availability vary by lender and change often. Contact Ruben to see which options are available for your scenario today.