09/06/2026
The Fannie Mae HomeStyle Renovation loan is a conventional mortgage that lets a buyer purchase a property and finance the renovations in one loan.
The simplest way to explain it is:
The buyer borrows against what the property should be worth after the renovations—not merely what it is worth today.
How it works
Suppose a buyer finds a property for $200,000 that needs $75,000 in repairs.
Purchase price: $200,000
Renovation budget: $75,000
Total project cost: $275,000
Appraised “as-completed” value: $300,000
The lender bases the maximum financing on the lesser of:
The purchase price plus renovation costs: $275,000, or
The as-completed appraised value: $300,000
In this example, the lower figure is $275,000. The buyer’s required down payment would be calculated from that figure, subject to the particular occupancy type, number of units and Fannie Mae loan-to-value limits. Some qualified principal-residence buyers may be eligible for financing as high as 95% or, when combined with HomeReady, potentially 97%. The lender and Desktop Underwriter determine the actual eligibility. Fannie Mae loan and borrower eligibility
What can be renovated?
HomeStyle is unusually flexible. It can finance:
Roofs, windows, electrical, plumbing and HVAC
Kitchens and bathrooms
Flooring and cosmetic improvements
Structural repairs
Room additions
Garages and accessory structures
Swimming pools
Accessory dwelling units or in-law suites
Accessibility and aging-in-place modifications
Energy-efficiency and storm-resiliency improvements
Landscaping and permanently attached improvements
Certain appliances when included in a larger kitchen or utility-room renovation
There is no minimum renovation amount, and the improvements do not necessarily have to increase the property’s value dollar-for-dollar. However, a complete teardown and reconstruction is not permitted. Fannie Mae HomeStyle guidelines
The money does not go directly to the buyer
This is one of the most important things to understand.
At closing:
The seller receives the purchase proceeds.
Renovation money goes into a controlled escrow account.
The contractor performs the work according to an approved contract.
Inspections confirm completed stages.
The lender releases renovation money through draws.
The lender may allow an initial draw of up to 50% of the planned renovation costs, depending on the project and lender. Later payments generally require completed work, an inspection and the borrower’s authorization. Fannie Mae escrow and draw requirements
The contractor has to be approved before closing
The buyer cannot close first and decide later what to renovate.
Before closing, the lender generally needs:
A detailed scope of work
Plans and specifications
An itemized contractor bid
A construction schedule
A draw schedule
Contractor licensing and insurance
Identification of subcontractors and suppliers
The fully executed renovation contract
This is why a HomeStyle transaction usually needs more time than an ordinary conventional closing.
The contractor doesn’t necessarily need to be on a Fannie Mae-approved list, but the lender must review and approve the contractor.
Can the buyer do the work?
Limited do-it-yourself work is permitted on certain one-unit properties, with lender approval.
However:
DIY renovations cannot exceed 10% of the as-completed value.
The buyer cannot finance or receive payment for personal labor.
Materials and properly documented outside labor may be reimbursable.
The lender must budget enough money to hire a contractor if the buyer cannot finish.
DIY is not available for manufactured homes.
In real life, many lenders are more restrictive than Fannie Mae and may not allow DIY work at all.
How long does the borrower have?
The approved renovation work generally must be completed within 15 months after closing. In limited circumstances, an extension may be possible, but the maximum is normally 18 months. Most lenders will establish a much shorter completion schedule based on the particular project. Fannie Mae completion requirements
What if the house is uninhabitable?
The property does not have to be habitable at closing.
If it is a principal residence and cannot be occupied during construction, the loan may include as much as six months of principal, interest, taxes, insurance and applicable association expenses. Those payments are held in escrow and applied while the home is uninhabitable. Fannie Mae HomeStyle FAQ
That can be extremely valuable when the buyer must pay rent or another housing expense during construction.
Contingency reserves
Unexpected problems are common when renovating older Florida homes.
A lender may require a contingency reserve—often 10% to 15% of the renovation budget—to cover surprises such as:
Hidden termite damage
Rotten roof decking
Electrical problems behind the walls
Plumbing failures
Additional permit requirements
Structural damage uncovered during demolition
For a two-to-four-unit property, Fannie Mae requires a 10% contingency reserve, which the lender can increase to 15%. A reserve is not automatically required by Fannie Mae on a one-unit property, although the lender may still require one.
Unused financed contingency money ordinarily reduces the principal balance after completion, unless the lender approves additional improvements.
Eligible properties
HomeStyle can potentially be used for:
One-to-four-unit primary residences
One-unit second homes
One-unit investment properties
Eligible condominiums and co-ops
Planned-unit developments
Manufactured homes, with restrictions
For a condominium, renovations generally must be limited to the interior of the unit and permitted by the condominium documents or approved by the association.
Important renovation limits
Renovation costs generally cannot exceed:
Purchase: 75% of the lesser of the purchase price plus renovation costs or the as-completed appraised value
Refinance: 75% of the as-completed value
Manufactured home: 50% of the as-completed value
That is a renovation-cost limitation—not the borrower’s loan-to-value limit.
HomeStyle versus FHA 203(k)
HomeStyle FHA 203(k)
Conventional financing FHA financing
Primary, second home or qualifying investment property Generally owner-occupied primary residence
Mortgage insurance may eventually be removable FHA mortgage insurance usually remains for the required FHA period
Potentially more flexible improvements, including pools Luxury improvements such as pools generally excluded
Conventional appraisal and underwriting FHA appraisal, property and borrower requirements
May work well for stronger conventional borrowers May work well for buyers needing FHA credit or down-payment flexibility
HomeStyle is not automatically better. The right choice depends on credit, cash, occupancy, property type, renovation scope, mortgage insurance and lender pricing.
Where these loans go wrong
The biggest problems usually aren’t caused by the mortgage itself. They are caused by poor preparation:
The buyer chooses a lender that rarely closes renovation loans.
The contractor’s paperwork is incomplete.
The bid is vague instead of itemized.
Insurance cannot be obtained at closing.
The appraisal does not support the projected value.
The buyer assumes improvements add value dollar-for-dollar.
The contractor expects all the money upfront.
The project changes after closing without an approved change order.
The buyer lacks money for cost overruns.
The seller will not accept a longer or more complicated closing.
The Realtor writes an unrealistic inspection or closing schedule.
The Florida opportunity
In Tampa Bay, HomeStyle can be especially useful when a house has:
An old roof that makes insurance difficult
Outdated electrical panels
Cast-iron or failing plumbing
An obsolete kitchen or bathrooms
Hurricane or flood-related damage
Settlement repairs
An unfinished addition
A need for impact windows, shutters or other resiliency improvements
But there is an important distinction:
HomeStyle can finance the repair, but the buyer still needs a lender and insurance company willing to insure and close on the property in its present condition.
That insurance question should be addressed immediately—not a week before closing.
My practical rule
HomeStyle is best when three things are true:
The property has enough potential value after renovation.
The buyer is organized and financially prepared for construction.
The lender, contractor, Realtor, appraiser and insurance agent understand renovation financing.
The loan solves the financing problem. It does not solve poor contractors, inaccurate budgets, unrealistic values or insurance problems. Those still require judgment and careful coordination.
