A Freddie Mac CHOICERenovation loan lets you finance the purchase or refinance of a home together with its renovation costs under one loan. Unlike taking out separate loans for buying and remodeling, this product bundles everything into a single conventional mortgage payment.
How CHOICERenovation Loans Work
You start by applying with your chosen lender, providing renovation plans and contractor estimates for the improvements you want. The property appraiser then assesses the “as-completed” value—what the home will be worth after all renovations finish. Your loan amount is based on this future value, typically allowing you to borrow more than the home’s current price.
At closing, the seller receives the purchase funds, and your renovation money is held in a controlled escrow account managed by the lender. Renovations begin once you take ownership, and funds are disbursed in draws as work meets agreed milestones, with inspections to ensure quality and compliance.
Who Can Benefit from a CHOICERenovation Loan?
- First-time homebuyers wanting to afford fixer-uppers without juggling multiple loans.
- Current homeowners looking to refinance and renovate simultaneously.
- Real estate investors seeking to renovate properties for sale or rental.
- Homeowners recovering from disaster damage who need funds to repair and upgrade.
Renovations Eligible for Financing
CHOICERenovation loans generally cover value-adding improvements such as kitchen and bathroom remodels, room additions, basement finishing, roof or HVAC repairs, and accessibility modifications. The funds cannot be used for luxury extras like hot tubs, non-permanent fixtures, or cash back to the borrower. Renovation work typically must be done by licensed contractors.
Important Considerations
- Most lenders require licensed contractors to perform the renovations, with some exceptions for “sweat equity” if you have proven expertise.
- Funds are closely controlled and released only for approved work following inspections.
- Unlike FHA 203(k) loans—which are government-backed with more lenient qualification—CHOICERenovation loans are conventional mortgages, often requiring better credit and down payment.
Tips for a Successful Renovation Loan Process
- Choose lenders experienced in CHOICERenovation loans for smoother approvals and support.
- Carefully vet contractors to ensure they meet licensing and insurance requirements and understand the draw payment process.
- Set aside a contingency fund of 10-15% above your renovation budget for unexpected costs.
For further details on home renovation financing, see our article on Home Renovation Financing and learn how CHOICERenovation compares to government programs like the 203(k) Streamline Loan.
References:
- Freddie Mac CHOICERenovation Mortgage: https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/choicerenovation-mortgages
- NerdWallet – Freddie Mac CHOICERenovation Loan Explained: https://www.nerdwallet.com/article/mortgages/freddie-mac-choicerenovation-loan
For official guidance, visit FreddieMac.com.
