Fannie Mae Expands Renovation, Adu Financing In Major Policy Update

Fannie Mae has announced several new policies in its latest Selling Guide update that are aimed at improving liquidity and expanding access to affordable housing.

The changes include new eligibility for manufactured homes, expanded options for accessory dwelling units (ADUs) and updates to adjustable-rate mortgage (ARM) requirements, the government-sponsored enterprise announced on Wednesday.

On the product side, Fannie Mae is introducing HomeStyle Refresh, which will replace HomeStyle Energy and expand financing options beginning March 31, 2026.

The product allows borrowers to finance purchase or cash-out refinance transactions up to 15% of the as-completed appraised value for renovation costs, following standard loan-to-value requirements. Eligible uses include cosmetic and functional upgrades, disaster repairs, resiliency improvements and environmental remediation for issues such as lead, asbestos or mold.

Fannie also implemented immediate changes to HomeStyle Renovation. Upfront disbursements have been increased to 50% of total renovation costs for materials, permits, architectural and design expenses, and borrower deposits.

The previous $50,000 renovation cap for manufactured homes was replaced with a limit of 50% of the as-completed appraised value. Fannie also clarified that limited cash-out refinances may be used to buy out a co-owner’s interest — such as in divorce or inheritance — while renovating the property.

For ARMs, Fannie eliminated the requirement that the difference between the initial note rate and the fully indexed rate at origination not exceed 3% for 7- and 10-year ARMs. That change is effective immediately.

The agency also expanded property eligibility for ADUs and manufactured homes, effective March 31. The updates allow up to four ADUs on two- to three-unit properties and up to three on single-unit properties. Manufactured home eligibility was broadened to include two- to four-unit properties and multistory manufactured homes.