This is a repost, but we had this same issue happen today. we had fixed about 10-12 i7 and 7 plus phones to date with no issues, but on this one the home button stopped responding (fingerprint worked fine). After swapping screens, trying donor phones, etc, nothing. So we backed up phone, dropped it to DFU mode and did a complete restore. Home button came back just fine.
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=== Update (05/15/2017) ===
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I posted earlier that we had this issue, did a reconnect dropped phone to DFU and restored and were fine. Since then we have fixed 50+ iphone 7 and 7 plus models, and no issues at all, I think for us that first one was an early batch issue similar to issues with haptic feedback on 6s series.
This is a repost, but we had this same issue happen today. we had fixed about 10-12 i7 and 7 plus phones to date with no issues, but on this one the home button stopped responding (fingerprint worked fine). After swapping screens, trying donor phones, etc, nothing. So we backed up phone, dropped it to DFU mode and did a complete restore. Home button came back just fine.