Aligning Contractor Bids with New Renovation Lending Policies

As Fannie Mae’s renovation lending programs continue to expand, contractors who understand and adapt to these changes gain a competitive advantage. Updated policies—such as increased upfront disbursements, expanded ADU eligibility, and greater scope flexibility—directly impact how renovation bids should be structured.

Contractors who align their bids with lender expectations not only improve approval timelines but also increase their chances of winning and successfully completing renovation-funded projects.

Renovation loans are not traditional construction contracts. Lenders review contractor bids to confirm that costs are reasonable, scopes are clearly defined, and expenses align with approved financing guidelines.

With expanded renovation funding options, lenders are paying closer attention to how bids are organized. Poorly structured bids can lead to:

• Delayed loan approvals

• Draw funding issues

• Scope revisions

• Increased scrutiny from lenders and investors

Well-structured bids, on the other hand, support smoother underwriting, faster disbursements, and fewer project disruptions.

With Fannie Mae now allowing up to 50% upfront disbursements, contractors should clearly identify early-stage costs within their bids.

This includes separating line items for:

• Materials and equipment purchases

• Permit and plan review fees

• Architectural or engineering coordination

• Mobilization and site preparation

Clearly defining these upfront expenses helps lenders justify early disbursements and improves cashflow predictability for contractors.

One of the most common bid issues is the lumping together of construction costs and soft costs. Under modern renovation lending guidelines, bids should clearly distinguish between:

• Hard construction costs

• Permit and inspection fees

• Design and consulting services

• Specialty trade work

This level of detail helps rehab consultants and lenders verify compliance and reduces the likelihood of bid revisions or resubmissions.

Contractors should also ensure that scopes of work reflect improvements commonly supported under renovation lending programs, including:

• Health and safety repairs

• Structural and system upgrades

• Energy efficiency and resiliency improvements

• Accessibility and aging-in-place modifications

• ADU construction or conversions, where permitted

Tying renovation scopes to long-term durability and livability strengthens lender confidence and supports borrower approval.

With expanded ADU eligibility, contractors bidding on ADU-related work must provide clear, well-documented scopes that address:

• Zoning and code compliance

• Utility connections and infrastructure capacity

• Foundation and access requirements

• Phasing and inspection milestones

Clear ADU scopes help ensure lender approval and prevent costly changes once construction is underway.

As renovation lending becomes more flexible, contractors who understand financing rules position themselves as trusted partners—not just vendors. Lenders and borrowers increasingly prefer contractors who submit compliant, detailed, and finance-ready bids.

Contractors who adapt benefit from:

• Faster loan approvals

• Fewer payment delays

• Stronger relationships with lenders and consultants

• Increased access to renovation loan-funded projects