FAQs: HomeStyle Energy

Yes. HomeStyle Energy is available for use by any approved Fannie Mae lender, and it doesn’t require special approval.

If using HomeStyle Energy to pay for future energy-related improvements, the lender must be able to operationally support the transaction, such as administering escrow accounts and monitoring completion of the work. This operational support is not needed for the payoff of other existing energy-related improvement financing through the limited cash-out refinance option since the completion of the improvements would occur prior to the transaction.

Delivery of HomeStyle Renovation loans continues to require special lender approval when the lender delivers loans to Fannie Mae prior to the completion of the renovation.

Energy-related improvements may include improvements that either reduce a home’s energy or water usage, improve its efficiency and provide a renewable source of energy for the home, or create greater home resiliency against natural disasters. Energy-related improvements may also include repairs made to a home damaged by a natural disaster. Additional details on these types of improvements can be found in the Selling Guide B5-3.3-01.

Fannie Mae believes that access to quality homeownership education and counseling can provide borrowers with the important information and resources to make informed decisions that support long-term homeownership sustainability.​ For purchase transactions with LTV, CLTV, or HCLTV > 95%, if ALL occupying borrowers are first-time homebuyers, then at least one borrower is required to take homeownership education from a qualified provider*, regardless of the product chosen. Fannie Mae HomeView®, which provides a clear view into the homeownership process, can be used to satisfy the homeownership education requirement.

​Exceptions to the homeownership education course requirement:​

• For loans that involve a Community Seconds^® or down payment assistance program, buyers may instead complete the homeownership education course or counseling required by the Community Seconds or down payment assistance program. However, it must be provided by a HUD-approved agency and completed prior to closing. ​

• ​The presence of a disability, lack of Internet access, and other issues may indicate that a consumer is better served through other education modes (for example, in-person classroom education or via a telephone conference call). In such cases, lenders should direct buyers to HOPE® Hotline 1-888-995-HOPE (4673), to speak with a HUD-certified counselor.

• ​Finally, buyers who have already completed housing counseling by a HUD-approved agency (as evidenced by a certificate of course completion) are not required to complete the homeownership education course.

​For more information, refer to the homeownership education FAQs.​

* A qualified provider must be independent of the lender, with homeownership education content that is aligned with National Industry Standards (NIS) or is offered by a housing counseling agency approved by the U.S. Department of Housing and Urban Development (HUD).

Upon lender review and approval, borrowers can complete eligible energy improvements themselves provided that:

• The “Do it Yourself” financing does not exceed 10% of the as-completed value of the property. Note: Inspections are required for all work items that cost more than $5,000
• The property is a 1-unit owner-occupied home, and not a manufactured home
• The reimbursement is limited to the cost of materials or the cost of properly documented contract labor (sweat equity will not be reimbursed).

Yes, it is acceptable as a limited cash out refinance (LCOR) as long as the borrower does not exceed the standard cash back allowance permitted on these loans as stated in Selling Guide section B5-3.3-01.

ENERGY STAR-certified products are eligible for HomeStyle Energy without an energy report. The lender must verify the product is on the EPA ENERGY STAR product list located at: https://www.energystar.gov/productfinder. The lender may also use product collateral identifying the improvement as ENERGY STAR-certified. Lender must maintain a copy of the documentation that shows that the energy-related improvement is ENERGY STAR-certified in the individual Loan file.

The borrower or lender may either visit the DOE Home Energy Score website or the HERS website to locate a local qualified energy assessor. Additionally, there may be a local or state home energy certification or audit program may be available to provide a report comparable to the DOE Home Energy Score or HERS report. In such cases, the energy report can be completed by an independent home energy consultant or auditor certified by such a local or state program. Refer to Selling Guide section B5-3.3-01 for further details.

Yes. The cost can be included in the total eligible amount of financing available, up to 15% of the “as completed” appraised value of the property. Loans with energy-related improvements are subject to the applicable LTV, CLTV, and HCLTV ratios shown in the Eligibility Matrix.

Basic weatherization items may include, but are not limited to:

• air sealing (including weather-stripping doors, caulking windows and plumbing penetrations) 
• insulation (attic, floors, walls, basement)
•  duct sealing and insulation
•  smart thermostats and equipment controls
• replacement of windows and doors

Yes. The lender must establish a completion escrow for the incomplete improvements. These must be completed no later than 180 days from date of the mortgage note. For requirements related to completion of the postponed improvements, including escrow accounts, disposition of funds after work completion, and title reports, see the Requirements for HomeStyle Energy Improvements on Existing Construction table in the Selling Guide B4-1.2-05.

The lender should work with the borrower to determine the cost of the improvements to be included in the mortgage up to a maximum amount of $3,500. The lender must determine that the LTV ratio does not exceed the allowable LTV per the Eligibility Matrix by dividing the loan amount (including the cost of the energy improvements) by the lesser of the “as completed” appraised value of the property or the sum of the purchase price of the property and the cost of the energy-related improvements.

Yes. If the borrower needs additional funds to complete weatherization improvements, the lender may follow the guidelines that permit up to 15% of the “as completed” appraised value of the property to be used for energy-related improvements. Under this process, the lender works with the borrower to obtain an energy report to verify that the proposed improvements are cost-effective. The cost effectiveness can be evaluated in terms of the aggregate impact of the proposed improvements. This means not every energy-related improvement requires the test for cost effectiveness, provided that all of the proposed improvements together meet the test for cost effectiveness.

HomeStyle Energy can be used to repair homes damaged in a natural disaster or by an environmental disaster and to install resiliency or preventative improvements, including:

• storm surge barriers
• foundation retrofitting for earthquakes
• hazardous brush and tree removal in fire zones
• retaining walls to address mud or water flows
• other items specifically needed to either repair environmental disaster damage or improve the home’s ability to withstand environmental hazards, such as hurricanes, tornados or wind storms, earthquakes, flooding, landslides, and wildfires

Installation of radon remediation systems is also an eligible improvement under HomeStyle Energy.

Repairs and improvements must be in compliance with local zoning and building codes. They must also be properly permitted when the local permitting authority requires permits for specific work or the completion of upgrades. Lenders are encouraged to work with homeowners to identify solutions for repairing or improving the home that meet or exceed local standards for environmental or natural disaster remediation and resiliency.

All mortgage loans with HomeStyle Energy improvement features require an appraisal based on an interior and exterior property inspection. The appraisal must be completed on the appropriate form depending on the property type. When the mortgage is being delivered prior to the completion of the repairs or improvements, appraisers must determine the “as completed” value of the property subject to the work being completed. A certification of completion is required when the mortgage is delivered prior to the completion of the improvements.

Fannie Mae’s policy in Selling Guide B5-4.2-02 permits limited cash-out refinancing either for the reimbursement of out-of-pocket expenses already incurred by the homeowner or for consolidation of subordinate financing that was used for natural disaster repairs. It is also limited to principal residences in Federal Emergency Management Agency Disaster Areas that have been designated as eligible for Individual Assistance.

Under HomeStyle Energy, repairs are undertaken after securing the purchase or refinance mortgage, and the lender releases funds from an escrow account directly to contractors. Eligible properties are not limited to properties located in areas with an official disaster declaration by any local, state, or federal agency.

If the borrower is paying off a PACE loan, documentation must be provided showing that the funds are solely being used to pay off the PACE loan obtained for improvements on the subject property. A payoff statement from the PACE program is sufficient to document the outstanding balance to be paid off.

If the payoff is for other secured or unsecured debt that was used to finance energy-related improvements the borrower must provide copies of invoices or receipts documenting the cost of the related expenses.

No. Consumers may only refinance debt, including home equity loans, PACE financing, or other debt used for energy improvements.

Yes. The lender must deliver the loan with Special Feature Code (SFC) 375 to receive the $500 LLPA credit.

Yes, only if those improvements are done through HomeStyle Renovation. The lender must have special lender approval to sell and service HomeStyle Renovation loans when the lender delivers HomeStyle Renovation loans to Fannie Mae prior to the completion of the renovation.

Homeowners who choose to finance energy-related improvements as part of an overall renovation can combine the HomeStyle Renovation mortgage with HomeStyle Energy.

If one or more of the energy-related improvements financed through the HomeStyle Renovation product do not require an energy report to be eligible for HomeStyle Energy per the Selling Guide, then an energy report is not required and the lender may deliver the loan with the appropriate HomeStyle Renovation Special Feature Code and the HomeStyle Energy Special Feature Code 375 and receive the $500 LLPA credit.

If all of the energy-related improvements financed through the HomeStyle Renovation product require an energy report to be eligible for HomeStyle Energy per the Selling Guide, then an energy report is required and the lender may deliver the loan with the appropriate HomeStyle Renovation Special Feature Code and the HomeStyle Energy Special Feature Code 375 and receive the $500 LLPA credit.

If the HomeStyle Renovation loan includes any ENERGY STAR®-certified improvements, then the lender must deliver the loan with SFC 773 (EnergyStar-certified improvements) and SFC 375 (HomeStyle Energy) to receive the $500 LLPA credit. 

For limited cash-out refinances of a PACE loan, the entire limited cash-out refinance loan amount may be used to pay off the PACE loan.