source:
  type: guide
  id: fnma-sel-b5-3.2-02
  authority: 'Fannie Mae Selling Guide B5-3.2-02 — HomeStyle Renovation Mortgages:
    Loan and Borrower Eligibility'
  description: 'Fannie Mae Selling Guide B5-3.2-02 — HomeStyle Renovation Mortgages:
    Loan and Borrower Eligibility.'
  coverage_tier: operative
obligations:
- id: fnma-sel-b5-3.2-02-full
  canonical_id: fnma-sel-b5-3.2-02-full
  section: 'Fannie Mae Selling Guide B5-3.2-02 — HomeStyle Renovation Mortgages: Loan
    and Borrower Eligibility'
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: 'Fannie Mae Selling Guide B5-3.2-02 — HomeStyle Renovation Mortgages:
      Loan and Borrower Eligibility'
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B5-3.2-02, HomeStyle Renovation Mortgages: Loan and Borrower
      Eligibility (12/10/2025) Introduction This topic contains information on HomeStyle
      Renovation mortgages and borrower eligibility requirements, including: Published
      May 6, 2026 731 Renovation-Related Costs Property Requirements HomeReady Eligibility
      Mortgage Terms “Do It Yourself” Option LTV Ratios Limited Cash-out Transactions
      Borrower Requirements Renovation-Related Costs Renovation-related costs that
      may be considered as part of the total renovation costs include: property inspection
      fees; costs and fees for the title update; architectural and engineering fees;
      independent consultant fees; costs for required permits; other documented charges,
      such as fees for energy reports, appraisals, review of renovation plans, and
      fees charged for processing renovation draws; and up to six months payments
      (PITIA) if a principal residence property cannot be occupied during renovation
      (see B5-3.2-04, HomeStyle Renovation Mortgages: Costs and Escrow Accounts for
      additional information). Note: An amount for sweat equity may not be factored
      into the renovation costs. Property Requirements The security property for a
      HomeStyle Renovation mortgage must be a one- to four-unit principal residence;
      a one-unit second home; a one-unit investment property; a manufactured home;
      or a unit in an eligible PUD, condo, or co-op project. When the security property
      is a unit in a condo or co-op project, the proposed renovation work must be
      permissible under the bylaws of the HOA or co-op corporation, or the HOA or
      co-op corporation must have given written approval for the renovation work.
      The renovation work for a condo or co-op unit must be limited to the interior
      of the unit, including the installation of ﬁre walls in the attic. The renovation
      of manufactured homes is allowed under HomeStyle Renovation provided the improvements
      do not include structural changes (such as adding a garage or other attached
      element). Eligible, non-structural improvements include, but are not limited
      to Published May 6, 2026 732 improvements to kitchens and bathrooms; installing
      energy eﬃciency heating and cooling systems; changes to address mobility and
      aging in place requirements; and installation of new windows, doors, siding,
      or rooﬁng provided these changes do not alter the structure of the unit. HomeReady
      Eligibility HomeReady loans are eligible in combination with HomeStyle Renovation;
      however, the more restrictive requirements of HomeReady or HomeStyle Renovation
      apply when these two products are combined on a loan. For example, a HomeReady
      HomeStyle Renovation mortgage must be a principal residence transaction, whereas
      standard HomeStyle Renovation permits second homes and investment properties.
      Exceptions: For purchase transactions with LTV, CLTV, or HCLTV ratios 95.01
      - 97% that combine HomeReady and HomeStyle Renovation, Fannie Mae is not requiring
      at least one borrower to be a ﬁrst-time homebuyer. The mortgage insurance requirements
      for HomeReady apply when HomeReady and HomeStyle Renovation are combined. See
      B7-1-02, Mortgage Insurance Coverage Requirements, for details. Mortgage Terms
      A HomeStyle Renovation mortgage may be either a ﬁxed-rate mortgage or an ARM
      loan. The original principal amount of the mortgage may not exceed Fannie Mae’s
      maximum allowable mortgage amount for a conventional ﬁrst mortgage. Fannie Mae
      provides the HomeStyle Renovation Maximum Mortgage Worksheet (Form 1035), to
      assist lenders in calculating the maximum loan amount. The maximum cost for
      renovations for various HomeStyle Renovation scenarios are described in the
      following table. Transaction Type The cost of renovations must not exceed...
      Purchase transaction 75% of the lesser of • the sum of the purchase price of
      the property plus renovation costs, or • the “as completed” appraised value
      of the property. Reﬁnance transaction 75% of the “as completed” appraised value
      of the property. Manufactured homes 50% of the “as completed” appraised value.
      Published May 6, 2026 733 “Do It Yourself” Option The “Do It Yourself” option
      is available for renovations made to one-unit properties by the borrower. This
      option is not available for manufactured homes. “Do It Yourself” renovations
      may not represent more than 10% of the “as completed” value of the property.
      The lender must review and approve the renovations in advance, and must inspect
      the completion of all items that cost more than $5,000. A borrower may request
      reimbursement for their payments for the cost of materials or for the cost of
      properly documented contract labor, but not for the cost of their sweat equity
      (labor). When a borrower chooses this option, the lender must fully budget for
      the cost of labor and materials related to the renovation so that, should the
      borrower be unable to complete the work, a contractor can be hired to ﬁnish
      any of the “Do It Yourself” repairs. LTV Ratios All of the applicable LTV, CLTV,
      and HCLTV ratios for HomeStyle Renovation mortgages can be found in the Eligibility
      Matrix. The LTV ratio calculation diﬀers based on the applicable transaction
      type. For a purchase money transaction, the LTV ratio is determined by dividing
      the original loan amount by the lesser of the “as completed” appraised value
      of the property or the sum of the purchase price of the property and the total
      renovation costs. For a reﬁnance transaction, the LTV ratio is determined by
      dividing the original loan amount by the “as completed” appraised value of the
      property. Limited Cash-out Transactions When a HomeStyle Renovation mortgage
      loan is originated as a limited cash-out reﬁnance transaction, the loan amount
      may include the amount required to satisfy the existing ﬁrst mortgage; the amount
      required to satisfy any outstanding subordinate mortgage liens that were used
      to acquire the property; closing costs, prepaid fees, and points; and the total
      renovation costs, including allowable renovation-related costs for the home
      improvements up to the maximum permitted LTV and CLTV ratios. The borrower may
      not receive any cash proceeds from the transaction. This includes funds that
      are generally allowed for a standard limited cash-out reﬁnance transaction.
      Excess funds, if any, after renovations are completed, may be applied to the
      loan balance as a curtailment or may be reimbursed to the borrower for the cost
      of actual supplies or additional renovations for which paid receipts are provided.
      The value of sweat equity may not be reimbursed. Borrower Requirements Published
      May 6, 2026 734 Borrowers must meet the requirements of B2-2-01, General Borrower
      Eligibility Requirements. Nonproﬁt investors and local government agencies may
      be considered for eligibility on a negotiated basis. Lenders may contact their
      Fannie Mae customer account team for more information. To ensure that the borrower
      understands all of the terms of a HomeStyle Renovation mortgage, the lender
      may use Fannie Mae’s HomeStyle Renovation Consumer Tips (Form 1204), as a checklist
      for the key facts that need to be disclosed to the borrower, and the borrower’s
      signature will serve as an acknowledgment of their understanding of these facts.
      Recent Related Announcements The table below provides references to recently
      issued Announcements that are related to this topic. Announcements Issue Date
      Announcement SEL-2025-10 December 10, 2025 Announcement SEL-2019-03 April 03,
      2019'
  judgment: false
