How Freddie Mac CHOICERenovation® Funds Are Distributed

How Escrow Draws Work

Four stages from closing to final inspection — payments follow verified progress.

01

Close with escrow

Purchase or rate/term refinance closes. Renovation funds, contingency, draw admin fees, and inspection fees are held — not wired to your personal account as free cash.

02

Work begins

One general contractor (plus specialty trades) starts against the approved bid package. Permits and materials move per the project plan.

03

Request draws

When a milestone is done, a draw request triggers inspection. Approved amounts pay the contractor with a 10% holdback until completion.

04

Final release

Final 1004D inspection clears remaining escrow. Unused contingency may be applied to principal; cash-paid contingency may be reimbursed.

Why Draws Protect Everyone

Paying contractors only after verified progress reduces the risk of unfinished work, abandoned jobs, or funds diverted to unrelated expenses. It also keeps the after-improved appraisal honest — the lender financed a specific finished condition.

Expect holdbacks on incomplete items and documentation that matches invoices to the original bid. Change orders need lender approval before extra dollars leave escrow.

Ryan and Steve walk you through the draw calendar — five draws plus final 1004D, 10% holdback, up to 50% material advance, and a 15-month completion window — so contractors, inspectors, and your deadline stay aligned.

At a Glance

Where funds sitRehab escrow after closing

Draw schedule5 draws + final 1004D

Holdback10% until completion

Materials advanceUp to 50% initial draw

Draw admin feeGreater of 1.5% or $500

Contingency10% min (15% if utilities off)

Completion15 months after closing

What Else Can Sit in Escrow

Labor and materials

Core repair costs from approved contractor bids.

Architectural / engineering

Soft costs that support plans and permits.

Draw inspections

Five draw inspections plus final 1004D.

Title updates & permits

Fees required to keep the project legal and clear.

Contingency reserve

10% min · 15% if utilities off · 20% max.

Financed PITI

Up to 6 months when the home is uninhabitable.

Keep Exploring

Related guides for contractors, DIY limits, and what soft costs roll into the escrow.

How Contractors Are Approved

Licensing and bids that feed the draw schedule.

Can I Do the Work Myself?

Why escrow payments go to licensed contractors.

Buy and Renovate

Purchase-plus-rehab from closing through final draw.

Funds on Renovation Loans

Cross-program escrow and draw overview.

Financed Improvements

What soft costs and contingency roll into escrow.

Freddie Mac CHOICERenovation® Program Hub

Full program overview and guide directory.

Frequently Asked Questions

Do I get renovation money as a lump sum at closing?

No. Eligible rehab funds typically sit in escrow after closing. Contractors are paid as inspections confirm progress against the approved bids — not as a single check to you on day one.

Who schedules the draw inspections?

The lender or escrow administrator coordinates inspections (or reviews contractor invoices and site checks per their process). You and the contractor request draws when a milestone is ready.

How many draws does Freddie Mac CHOICERenovation® allow?

Freddie Mac CHOICERenovation® allows five draws plus a final 1004D inspection. There is a 10% holdback until work is complete, and up to 50% of materials may be advanced on the initial draw. The draw administration fee is the greater of 1.5% of repair costs or $500.

What is a contingency holdback?

Freddie Mac CHOICERenovation® requires a minimum 10% contingency reserve (15% if utilities are off; 20% maximum) for unexpected repairs. Unused contingency may be applied to principal; cash-paid contingency may be reimbursed once work is complete and final inspection clears.

What if costs overrun the escrow?

Overages are usually your responsibility unless contingency covers them. Change orders need lender approval before additional work is financed. Plan the scope carefully before closing.

How Are Renovation Funds Distributed During the Project?