Fannie Mae Homestyle Energy Mortgage: What It Is, And How It Works

Written by Elijah BishopUpdated: 6th Mar 2022
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As the demand for solar power and energy efficiency grows, Fannie Mae has unveiled a new mortgage option for funding these options. This new financing program allows homeowners to execute renewable energy upgrades worth up to 15% of their home’s appraised value.

In this article, we’ll go over Fannie Mae’s Homestyle Energy mortgage, how it works, improvements covered by it, and several pros and cons associated with it. 

What Is the Fannie Mae HomeStyle Energy Mortgage? 

The HomeStyle Energy Mortgage Program by Fannie Maeallows borrowers to incorporate the cost of energy-efficient modifications in their loan amount when purchasing a property or refinancing an existing mortgage. 

The program’s overall purpose is to assist borrowers in improving the energy efficiency of their homes, which can reduce their monthly utility expenses and make homeownership more reasonable. According to the program requirements, borrowers can utilize up to 15% of the post-upgrade, as completed property value, for energy-efficient upgrades and repairs. 

>> More: What Is an Energy-Efficient Mortgage?

How Does the HomeStyle Energy Mortgage Work? 

Fannie Mae offers the HomeStyle Energy Mortgage Program through participating lenders. Fannie Mae’s involvement is less relevant from the borrower’s perspective since when you apply for a HomeStyle Energy mortgage, you interact with the lender, not Fannie Mae. Any Fannie Mae-approved lenders, such as a bank, mortgage broker, or credit union, can help you apply for the program. Unlike previous Fannie Mae programs, no further approval or certification is necessary for mortgage lenders to offer the service.

When you apply for a HomeStyle Energy mortgage, you will work with your lender to evaluate the worth of the energy-efficient changes you wish to make. This procedure entails itemizing and assessing the upgrades to estimate their cost and any prospective benefits, such as lower utility bills. Lenders want to ensure that you get a financial return on your property improvement investment.

If the cost of your energy-efficient upgrades is less than $3,500, the lender will use cost estimates and other information provided by the borrower to document the upgrades. Furthermore, an energy report is not necessary for certain energy-efficient modifications, such as the installation of water efficiency devices, solar panels, or radon mitigation. An energy report is also not required if the HomeStyle Energy loan refinances debt is used to acquire or build energy-efficient upgrades, such as a PACE or home equity loan

Suppose the estimated cost of the renovations exceeds $3,500 and falls outside of the energy-efficient upgrade categories described above. In that case, the borrower must acquire an energy assessment from a qualified auditor to document the modifications. 

HomeStyle Energy Mortgage Pros and Cons:


  • The HomeStyle Energy Program allows you to finance the purchase of a home or refinance your existing mortgage with a single mortgage that includes the cost of significant energy efficiency improvements, rather than arranging a mortgage plus a second mortgage, home equity loan, line of credit, or PACE loan to finance the improvements. 
  • Mortgage Amount Determined by the Property’s Post-Improvement Value. The HomeStyle Energy Program allows you to qualify for a mortgage based on the property’s post-improvement value. Using the greater as-completed property value allows borrowers to qualify for a larger mortgage. It avoids the need for borrowers to arrange separate financing for energy efficiency improvements, saving borrowers time and money.
  • Applies to Both Home Purchase Loans and Refinancing. The HomeStyle Energy Program is available for both home purchase and refinances loans. Although the program is often utilized to purchase homes, it is also beneficial to borrowers who want to refinance their existing mortgage while also doing a large energy efficiency improvement project.


  • Proceeds for Energy-Efficient Improvements are Limited. Borrowers can only spend up to 15% of the post-improvement property value in loan proceeds for energy efficiency improvements under the HomeStyle Energy Mortgage Program. Although the 15% restriction should be sufficient for most upgrades, it may prohibit you from implementing greater energy efficiency measures. Furthermore, the proceed limit limits the amount of work done on less expensive homes.
  • Extra Closing Expenses and Documentation. Borrowers must furnish lenders with a detailed plan outlining the energy efficiency improvements they intend to make to a property. The plan details the expected cost of the modifications and quantifies the anticipated energy savings for each project. Borrowers must get an energy report from a certified auditor to document the upgrades if the projected cost of the modifications exceeds $3,500. 

What Improvements Are Covered by the HomeStyle Energy Mortgage? 

The program allows for a wide range of energy and water-efficient house improvements. The modifications are divided into basic weatherization projects that cost less than $3,500 and larger initiatives that cost more than $3,500. Below are some of the common improvements: 

Energy Efficiency 

Improvements include:

  • Smart thermostats
  • Heating, ventilation, and cooling systems (HVAC)
  • Basic weatherization and insulation
  • Energy-saving windows and doors
  • Water heaters

Water Efficiency 

Improvements include:

  • Water-saving toilets
  • Low-flow showerheads and faucets

Renewable Energy

Improvements include:

  • Solar panels
  • Wind power
  • Geothermal power

Home Resilience and Natural Disaster Readiness 

Improvements include: 

  • Retrofitting foundations
  • Adding retaining walls
  • Removing bushes/trees in fire-prone areas
  • Storm surge barriers
  • Radon remediation devices
  • Storm windows and doors

HomeStyle Energy Features and Benefits 

Below are some of the benefits associated with HomeStyle Energy include: 


You could put down as little as 3% on a property, get competitive interest rates (when compared to PACE loans and other financings), and enjoy the assurance of cancellable mortgage insurance once you reach 20% equity. Mortgage tax deductions are also available to you.


When you use HomeStyle Energy to buy a home, you may undertake the necessary energy efficiency improvements at the same time. You can continue to work with the same lenders you’ve been using for your mortgage or refinance.


Because the cost of energy efficiency upgrades is integrated into a HomeStyle Energy mortgage, there is only one financing application and one payment to keep track of each month.

Most lenders worldwide offer it and allow you to consolidate existing energy improvement debt from PACE loans, credit cards, and home equity credit lines to simplify monthly costs.

Buying a Home with HomeStyle Energy Mortgage

When purchasing a home, HomeStyle Energy allows you to utilize up to 15% of the property’s “as-completed” value (the home’s appraised worth once the renovations are completed) for new energy improvements. 

For example, after modifications, a qualifying buyer with a $100,000 house may receive up to $15,000 (15%) from the mortgage transaction. Above $3,500 in renovations, a Home Energy Reporting System (HERS), Department of Energy (DOE), or a comparable report may be required to guarantee the correct changes—those that will make a difference for your home—are made.

Refinancing a Home with HomeStyle Energy 

Homeowners who plan to make energy-saving upgrades or have already done so may be eligible for a limited cash-out refinance for up to 15% of the home’s worth. This implies you would refinance your current home loan into a new mortgage to gain access to your house’s equity. The equity amount would subsequently be utilized to fund further energy improvements or repay other energy-related debt.

>> More: Best Cash-Out Refinance Lenders

Bottom Line: Fannie Mae HomeStyle Energy Mortgage 

While the Fannie Mae energy mortgage program is still new in the mortgage sphere, it offers undeniable benefits for the average homeowner. The HomeStyle Energy mortgage is beneficial to borrowers who want to pay off debt for existing energy improvements. It will also benefit homeowners who want to improve the comfort and efficiency of their homes.

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Elijah Bishop
Elijah Bishop

Elijah A. Bishop is a Senior Personal Finance Writer who has been writing about real estate and mortgages for years. He has a Bachelors of Arts Degree in Creative writing from Georgia State University and has also attended the Climer School of Real Estate. He also holds a realtor license and has been in and out of the US mortgage industry as a loan officer. Bringing over 15 years of experience, Elijah produces content that analyzes ethnicities, race, and financial well-being. His areas of expertise are mortgages, real estate, and personal loans.