By Alena KairysMay 9, 2022
The VA renovation loan doesn’t get as much attention as the regular VA loan, but it should. If you’re an active-duty service member or military Veteran, this loan program can help you buy and repair a home without sacrificing affordability or convenience. Here’s what you should know about the VA renovation loan.
What is a VA Renovation Loan?
The VA renovation loan, also called a VA rehab loan, is a specialized form of the VA loan. It’s essentially the same as an FHA 203k loan, but backed by the Department of Veterans Affairs. The VA rehab loan allows you to buy or refinance a home while also paying for repairs to make it more livable. Instead of taking out another loan to pay for renovations, you’ll only have one mortgage and one monthly payment. This streamlined option can be great if you’ve found a house within your price range but is in less-than-ideal condition. For homeowners who want to refinance, the renovation loan can also lower your mortgage payments.
Like a standard VA loan, basic eligibility is the same, and you won’t need to worry about a down payment or needing private mortgage insurance (PMI). Since the loan amount will be based on the home’s as-completed value, you’ll need provide your lender quotes from your chosen VA-certified contractor. As part of the loan’s condition, all work on the home has to be done by a contractor with this builder ID; you can’t do any repairs yourself, either. The maximum amount you can borrow for repairs varies depending on your lender, though a ceiling of $50,000 is common. Even though a VA rehab loan doesn’t involve a down payment, you may be required to pay a funding fee.
How Can I Use It?
The loan must be used to renovate a single property that will be your primary residence; you can’t rent out or flip the property afterwards. Any repairs you plan to make need to improve its safety and livability, not just its appearance. For example, you could get new appliances or replace your HVAC system, but you can’t install a pool or start landscaping projects. The loan doesn’t cover projects that would alter the structure of the home, meaning you wouldn’t be able to add an addition or move load-bearing walls. Once the loan is approved, repairs need to be completed within 60 days from the closing date. During the repair phase, your contractor and lender need to be in close contact to ensure timely progress and fund disbursement. Once the project is finished, a VA appraiser will give your home a final review to verify that it meets the VA’s minimum property requirements (MRP).
The VA renovation loan gives servicemembers, Veterans, and their families more choices when it comes to homebuying. Whether you’re on the market for a new home or already own, the VA renovation loan makes it even easier to have a home that fits your needs.
NFM Lending is proud to offer the VA renovation loan to qualified borrowers. If you are interested in using a VA renovation loan to buy or refinance your home, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!
These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact us.