How HomeStyle® Renovation Funds Are Distributed

How Escrow Draws Work

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

01

Close with escrow

Purchase or refinance closes. Renovation funds (and contingency, when required) are held — not wired to your personal account as free cash.

02

Work begins

Licensed contractors start 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 or documentation review. Approved amounts pay the contractor.

04

Final release

Final inspection clears remaining escrow (and unused contingency per lender rules) when the scope is complete.

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, 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 Speeds Draws vs. What Stalls Them

Clear line-item bids

Inspectors can match completed work to dollars. Vague “allowance” bids slow every release.

Scheduled inspections

Coordinate draw requests with the escrow administrator — do not wait until the contractor needs cash overnight.

Unapproved change orders

Extra work without lender approval does not automatically pull from escrow.

Incomplete permits or photos

Missing documentation is the most common draw delay after work is physically done.

Keep Exploring

Related escrow and contractor guides.

How Are Contractors 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.

How Much Can I Borrow?

Sizing rehab dollars on after-improved value.

HomeStyle 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 HomeStyle allow?

Fannie Mae HomeStyle 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?

HomeStyle requires a minimum 10% contingency reserve (15% if utilities are off) for unexpected repairs. Unused contingency may be applied to the loan balance or released per lender rules 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 Construction?