CHOICERenovation^® FAQ

Freddie Mac currently offers construction conversion and renovation mortgages that provide permanent financing that replaces interim financing in either a single close or two-closing transaction. The construction or renovation must be completed prior to delivery of the mortgage to Freddie Mac. Construction conversion and renovation mortgages may be purchased, no cash-out, or cash out refinance mortgages. You can find complete requirements for construction conversion and renovation mortgages in Guide Chapter 4602(Opens a new window).

During the development of our Duty to Serve plan, we determined that a vital part of providing housing options for homebuyers is related to the need for a renovation offering to help address the large number of older homes and shifting demographics in today’s market. Our CHOICERenovation offering allows homebuyers to include renovation costs in the mortgage financing to assist in addressing the aging housing supply, the need for affordable housing and the increasing demand for aging-in-place housing solutions. CHOICERenovation also addresses a gap in the market for lenders looking for a robust, conventional offering to support renovation financing and provide cost-effective solutions for borrowers. 

CHOICERenovation differs from what is currently available in several ways. Primarily, it allows for a single-close transaction, where the mortgage includes the renovation costs in the financing. This allows lenders to sell loans to Freddie Mac where the homebuyer uses the loan proceeds to pay for the renovations. There is also another path available for approved lenders that allows them to sell us the loans before renovations are complete. Construction conversion and renovation mortgages do not finance the improvements made to the subject property; homebuyers may need mortgage financing to pay off any interim financing that was used to make the improvements. The mortgage loan sold to Freddie Mac is the permanent financing, which is used to pay off the interim financing. Also, mortgages secured by manufactured homes are not eligible under the renovation mortgage offering.

Lenders will be required to provide information on their past two years of experience originating and servicing renovation loans. Lenders must also be eligible to sell loans with recourse to Freddie Mac. For those lenders with less than two years of experience who are interested in delivering loans prior to renovation completion, they may be considered under acceptable exceptions, including supplying us with a vendor that meets those requirements.

CHOICERenovation is eligible for use with fixed-rate and adjustable-rate mortgage products. CHOICERenovation mortgages may be Home Possible^®, HFA Advantage^®, super conforming, or HomeOne^SM mortgages. CHOICERenovation may also be used with mortgages not specifically tied to Duty to Serve or other affordable lending products, programs, or objectives.

Yes. This is another important feature of this offering. See Guide Section 4607.7(d)(Opens a new window)for the maximum financed renovation costs secured by Manufactured Homes.

Yes, CHOICERenovation  Mortgages and GreenCHOICE^® Mortgages can be originated in conjunction with each other. In such cases, Sellers will be eligible for the $500 credit for credit fees as outline in Guide Exhibit 19  Credit Fees.pdf  Additionally, as it relates to energy and/or water efficiency improvements, under Guide Section 4606.4, an energy report may need to be obtained and retained in the mortgage file for GreenCHOICE Mortgages.

Yes, provided that, if there is a conflict between any of the requirements, the more restrictive requirements will apply. A Seller must ensure it has obtained any necessary approvals from Freddie Mac in order for CHOICERenovation loans to be originated in conjunction with the CHOICEHome offering.

The following includes maximum LTV ratios. Please note, the maximum LTV ratios depend on the specific product or offering; there may be additional possible LTV ratios, i.e. condominiums when the project reviews are streamlined; these numbers are subject to change. TLTV to 105% with eligible Affordable Seconds (only with Home Possible, HFA Advantage and HomeOne).

• 1-unit Primary Residence - 95% FRM/ARM / First-time homebuyer if > 95% (applies to HomeOne). (Can go up to 97% for Home Possible, HFA Advantage or HomeOne only)
• 2-unit Primary Residence - 85% FRM/ARM
• 3- and 4-unit Primary Residences - 80% FRM/ARM
• Second Homes - 90% FRM/ARM
• 1-unit Investment Property - 85% FRM / 7/1 and 10/1 ARM
• Manufactured Homes - 95% FRM/ARM

Yes. All mortgages with LTV ratios greater than 80% must have MI coverage in order to be eligible for sale to Freddie Mac. Please contact your mortgage insurer(s) directly to receive more information on any MI-related questions on CHOICERenovation mortgages delivered prior to renovations being complete and/or after renovations are completed.

Mortgages delivered under the CHOICERenovation offering must be submitted to Loan Product Advisor and receive a Loan Product Advisor “Accept” risk classification. Manual underwriting will not be accepted.

For refinances, the maximum permitted renovation costs are up to 75% of the “as-completed” appraised value. For purchases, the maximum permitted renovation costs are up to 75% of the lesser of 1.) the sum of the purchase price and renovation costs or 2.) the “as-completed” appraised value. If the mortgaged premises is a manufactured home, the maximum permitted renovation costs are the lesser of $50,000 or 50% of the “as-completed” appraised value.

Yes. The “as-completed” appraised value does include land value. We allow up to 75% of the “as-completed” value to be used to finance renovations.

The lender should reach out to their account executive for further discussion. Lenders without an account executive should call 800- FREDDIE.

The Seller must notify Freddie Mac at [email protected] if there are any concerns that the renovations will not be completed by the required completion date in accordance with Section 4607.4(a)(Opens a new window), or if there are any changes that impact the “as completed” value of the property as determined by the appraiser pursuant to Section 4607.8(Opens a new window).

Yes, if all issues that cause the property to be rated with a C5 or C6 condition rating are cured as part of the renovation. The appraisal report must be completed “subject to completion, repairs or alterations” and the reported condition rating must reflect the hypothetical condition that the repairs or alterations have been completed. See Guide Section 5605.8 for additional information related to appraisals completed “subject to” completion, repairs or alterations, or an inspection.

Yes, please see the link below to the templates for Maximum Mortgage Worksheetpdf(Opens a new window), Renovation Loan Agreementpdf(Opens a new window) and Renovation Contractpdf(Opens a new window).

No, Freddie Mac’s Correspondent XChange℠ program is not permitted for CHOICERenovation loans.

Yes, Freddie Mac does allow for the addition or renovation of ADUs.

Yes, provided the Seller has obtained prior written approval from Freddie Mac pursuant to Section 4607.17(Opens a new window). Sellers may request approval by contacting their Freddie Mac representative or the Customer Support Contact Center at 800-FREDDIE.

They are prohibited until all renovations have been completed, the Seller has obtained a completion report and Freddie Mac has approved removal of recourse.

Yes, Freddie Mac does allowConcurrent Transfers of Servicing involving CHOICERenovation Mortgages with Settlement Dates prior to completion of the renovations are only permitted if the Seller has obtained prior written approval from Freddie Mac pursuant to Section 4607.17(Opens a new window). When seeking Freddie Mac’s approval, the seller should discuss with their Freddie Mac account representative whether Freddie Mac can accommodate any bifurcation of the selling representation and warranty obligations. for the addition or renovation of ADUs.

A Transferee Servicer may engage an Outsourced Vendor or Servicing Agent, which may be the Seller, and it must ensure that it has established appropriate processes and communication protocols with any Outsourced Vendor or Servicing Agent it engages. See Section 4607.17(a)(Opens a new window) for more information regarding these special requirements.

No. When a manufactured home ADU is added to an existing site-built property, the total cost of the financed renovations must not exceed: