FAQs: HomeStyle Refresh

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

If using HomeStyle Refresh to pay for future 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.

HomeStyle® Refresh allows borrowers to finance a wide range of property improvements, including cosmetic updates, energy efficiency upgrades, resiliency enhancements, disaster preparedness measures, and environmental remediation. Eligible improvements can total up to 15% of the home’s “as-completed” appraised value, and may also include paying off higher-interest energy-related debt such as PACE loans. Additional details 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 the following transactions, at least one borrower on the loan must complete homeownership education prior to loan closing: 

• If none of the borrowers on a purchase transaction underwritten in DU has at least one credit account or installment account reported on their credit report, regardless of the loan product or whether the borrowers are first-time homebuyers (as instructed by DU);
• If all borrowers on a manually underwritten purchase transaction do not have a credit score, regardless of the loan product or whether the borrowers are first-time homebuyers;
• HomeReady purchase transactions when all occupying borrowers are first-time homebuyers; or
• Purchase transactions with LTV, CLTV, or HCLTV ratios greater than 95%, when all borrowers are first-time homebuyers. 

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 as long as it is 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.

Upon lender review and approval, borrowers can complete eligible 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.

HomeStyle Refresh can be used to repair homes damaged in a natural disaster or by an environmental disaster and to install resiliency or preventative improvements, including but not limited to:

• 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
• remediation for mold, lead, or asbestos
• installation of radon remediation systems

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 Refresh 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 Refresh, 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.

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.