How do draws work on a Fannie Mae HomeStyle Renovation loan?

At closing: the initial draw.

Renovation funds are not paid out in full when the loan closes. Fannie Mae's Selling Guide, section B5-3.2-04, lets the lender fund up to 50 percent of the total planned renovation costs as an initial draw at closing, and part of that draw may pay for permits, architect fees and design or planning costs. The rest stays in the renovation escrow account.

Before every later draw: an inspection.

The lender must obtain periodic inspections confirming the work is being completed as planned before it issues more escrow draws. The Servicing Guide, section D1-2-01, ties each later release to a request and an inspection that checks the work against the plans, including approved change orders. Under B5-3.2-04, funds go out by a check payable jointly to the borrower and the contractor, or by wire to the contractor once the borrower has consented in writing before each disbursement. If costs rise during the work, the borrower or the lender covers the increase; the loan amount is not raised to absorb it.

At the end: completion.

Before the last release, completion is documented on Form 1004D from a renovation consultant, architect or appraiser, confirming the work matches the plans and the appraisal's "subject to" items are done, with a certificate of occupancy where one is required.

Why it matters for lenders.

Each inspection is the record behind a release from the escrow account. A report that ties photos and percent complete to the renovation line items makes each release easier to support when the file is reviewed later. Fannie Mae updates these sections, so read the current text before setting procedure.

How RAZE handles it.

Where a lender uses a third-party inspector for interim HomeStyle draws, a RAZE draw inspection reports percent complete for each line of the renovation budget, with photos linked to the lines they support and GPS coordinates and date and time stamps on every photo. The completion report comes from the parties the guide names. Through RAZE it is a flat $125 per single-family inspection when RAZE sends the inspector, or $25 per request with your own inspector, per the RAZE Rate Card. RAZE documents the work; the lender decides what to release.