CHOICEReno eXpress guide: Freddie Mac’s new renovation loan

December 29, 2021 - 5 min read

Freddie Mac’s new renovation loan

Freddie Mac’s CHOICEReno eXpress program can provide much-needed cash if you’re buying or refinancing a home in need of improvements.

This one-time-close loan funds your mortgage and home improvements all with a single loan. That means just one set of paperwork, one closing, and one set of closing costs.

Like other one-time-close home improvement loans, CHOICEReno eXpress can save time and money for people who want to finance renovations on a new or existing home.

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What is the CHOICEReno eXpress renovation loan?

Home renovations can update a property to your style and liking. And some projects will even increase your home’s value. But renovations can be costly.

Freddie Mac’s CHOICEReno eXpress is designed for small-scale projects, and it works by combining home financing with a renovation loan. So rather than getting separate financing to cover home projects, you can get an all-in-one, single-close loan.

This streamlined renovation loan program is an alternative to using your personal savings, a credit card, or your home’s equity to finance home projects.

Keep in mind, though, this program isn’t for newly constructed properties. And it’s limited to certain types of loans and units.

Freddie Mac’s CHOICEReno eXpress differs from construction loans because you’re allowed to advance a contractor or home improvement store 100% of the cost of materials once you receive funds. However, you must provide an estimate from a home improvement store or licensed contractor.

The good news, though, is that you’re allowed to complete home improvement projects yourself if you’re a licensed contractor. But the program doesn’t allow payment to yourself for labor.

What renovations can you do with Freddie’s Mac CHOICEReno eXpress?

Freddie Mac’s new renovation loan program allows financing of small-scale cosmetic improvements, such as:

  • Minor interior and exterior remodeling
  • Interior and exterior painting
  • New windows and doors
  • Purchase of energy-efficient appliances
  • Repair or replace your roof

You can get mortgage financing, as well as an additional 10% of the property’s value for improvements (or 15% in a high-need community).

To illustrate, let’s say you’re buying a $300,000 house with a 5% down payment of $15,000. Since you can get 10% of the property’s as-completed value, under this program you might receive up to $30,000 for home improvement projects.

Freddie Mac CHOICEReno eXpress loan requirements

In addition to using the CHOICEReno eXpress loan for small-scale projects, you can only use this program with certain mortgage products.

It’s available with Freddie Mac fixed-rate and adjustable-rate mortgages, such as Freddie Mac Home Possible mortgages, Freddie Mac HomeOne mortgages, Freddie Mac HFA Advantage mortgages, and super conforming mortgages.

Properties eligible for the Freddie Mac CHOICEReno eXpress loan include:

  • 1-4-unit primary residences
  • 1-unit second homes
  • 1-unit investment properties
  • Manufactured homes

Keep in mind, the program’s maximum loan-to-value (LTV) depends on the type of unit and program.

  • 95-97% for 1-unit properties*
  • 105% for 1-unit properties with Affordable Seconds down payment assistance
  • 85% LTV for 2-unit primary residences
  • 80% LTV for 3-4 unit primary residences
  • 90% LTV for 1-unit second homes
  • 85% LTV for 1-unit investment properties
  • 95% LTV for manufactured homes

*Varies by loan program. Allowable LTVs are higher for first-time home buyers using the Freddie Mac HomeOne or Freddie Mac Home Possible mortgages

Typically, owner-occupied mortgages require moving into the property within 60 days of closing. However, this program doesn’t require occupancy during renovation, and you’re allowed up to 180 days to complete renovations.

Other Freddie Mac renovation loans

Although Freddie Mac’s CHOICEReno eXpress is an option for some borrowers, it isn’t an option for everyone.

For instance, this program only allows for small-scale renovations. If your home improvements don’t qualify for financing under the eXpress program, they might qualify under Freddie’s CHOICERenovation loan, which is the parent loan program.

Similar to the Xpress renovation loan, the CHOICERenovation is a single mortgage that wraps renovation costs with financing. You can also use this loan for a new purchase or refinance.

The difference, though, is that this program finances major home improvement projects, including renovations and repairs needed after a natural disaster.

This parent program has the same LTV maximum as the Freddie Mac CHOICEReno eXpress. And you can advance a licensed contractor or home improvement store 100% of the cost of materials. You’re allowed 365 days to complete improvements.

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Alternative renovation loan programs

Freddie Mac renovation loans aren’t the only alternative for small- (or large-) scale projects. Other options include:

Fannie Mae HomeStyle

Fannie Mae’s HomeStyle is another option for financing renovations with a conventional loan purchase. Whether you’re purchasing or refinancing, you can use funds for home improvements projects including landscaping projects and luxury upgrades.

FHA 203(k)

When buying or refinancing with the FHA-backed 203(k) mortgage, you can borrow up to 110% of a property’s proposed value for renovations. You can’t use this loan for an investment property, though, nor for luxury upgrades like a swimming pool or outdoor kitchen.

Cash-out refinance

Another option, if you already own your home, is cashing out some of your equity with a cash-out refinance. This involves borrowing more than the original loan amount and then getting the difference in cash. A cash-out refinance can be a great idea if you stand to lower your mortgage interest rate at the same time you tap your home equity.

Home equity loan

Or, you can apply for a home equity loan. This entails borrowing against the equity in your home and receiving a lump sum payout, typically up to 80% to 85% of your home’s value.

Unlike a cash-out refinance, this is a ‘second mortgage,’ meaning you take out a separate loan on top of your existing mortgage. This will leave you with two loans and two monthly payments. But it can be preferable to refinancing if you already have a great rate on your current mortgage — or if you’re almost done paying the home off.

Home equity line of credit (HELOC)

A HELOC also lets you borrow against your home’s available equity. But rather than get a lump sum, you’ll gain access to a line of credit that you can tap on an as-needed basis.

Choosing a home renovation loan

Freddie Mac’s CHOICEReno eXpress program is just one of many options to finance home improvements. The right loan type for you will depend on your finances, your current homeownership status, and the type of home renovations you want to complete.

Connect with a mortgage lender when you’re ready to discuss your options. A loan officer can help you determine what loan types are available, what you qualify for, and what will make the most sense in your situation.

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Valencia Higuera
Authored By: Valencia Higuera
The Mortgage Reports contributor
Valencia Higuera is a freelance writer from Chesapeake, Virginia. As a personal finance and health junkie, she enjoys all things related to budgeting, saving money, fitness, and healthy living.