A VA renovation loan allows veterans to make improvements to a property. It’s a single loan, doesn’t require a downpayment, and there’s no requirement for mortgage insurance. They work by combining the costs of buying a house and making improvements into one loan.
Are you interested in VA loan options for making home improvements this year? This loan could make homeownership possible for you! There are plenty of options, so keep reading to learn more about them.
1. VA Renovation and Rehab Loans
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When it comes to making home repairs, the VA renovation loan is usually the most popular option. This loan allows you to make repairs and other home adjustments while combining the expenses with your mortgage.
That way, you have a broader range of homes you can choose from while still sticking to the VA’s property requirements.
You can also use this loan option if you have a home that needs work done. The maximum loan amount is the home’s expected value after repairs, allowing you to get enough to complete the renovations.
It’s worth noting that some lenders do charge fees of up to 2% of the renovation loan. There are other fees to consider too, which will end up included in the mortgage. You want to make sure that you can afford it.
You’ll need to meet all of the basic VA loan service requirements to qualify for a renovation loan. Plus, you’ll need to have a certificate of eligibility. Many people also recommend that you have a credit score of 620 or higher.
There are also other requirements for you to qualify for the renovation loan. First of all, the home you’re repairing must be your “intended primary residence” after completing all the repairs. The improvements also must be for livability- not just to make the house look nicer.
Most importantly, the construction must end within 120 days of closing the loan. So, you’ll need to act quickly after you get the approval for the loan. If you don’t know where to start, you’ll want to contact the VA for contractors that they approve of.
In short, there are many requirements. However, most veterans should qualify as long as they want to improve the livability of their homes. Many of these requirements also apply to other VA loans, so you’ll need to keep them in mind as you continue reading.
2. VA Cash-Out Refinancing
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When you have equity in the home (it’s worth more than what you left on your mortgage), you can use a VA cash-out refinance to pay for any renovations or improvements you want. There aren’t many restrictions on what you can do with cash-out refinancing.
For example, you want to make $25,000 in repairs, and your current mortgage is $100,000. The lender offers you $125,000 in a new loan, and you pocket the $25,000 to use for repairs. This process is extremely fast, too; many people receive the money just a few days after closing.
So, if you have emergency home repairs that you need the money for, this option may be the best for you. It’s fast, so you can move on to making the improvements right away. Plus, you might receive tax deductions if you use the funds to improve your home.
Overall, this is another option that works for many people. The tax deductions make it appealing, but you’ll need to know your improvements count towards them before you start.
3. Energy Efficiency VA Loan
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Next, you might want to consider the VA loan for energy efficiency. This loan is for those who want to make changes to improve their home’s energy usage. For instance, you can use it to install new windows, improve air conditioning and heating, or insulation.
The VA does assume that your utility bills will go down, so you can receive a smaller amount of funds for improvements without paying the money back. If you need more than $3,000, the VA will need to review your energy efficiency plans. They’ll check that the mortgage payments won’t go over the reduction in utility costs.
Suppose you need more than $6,000 for energy efficiency updates. In that case, the VA will need you to obtain a VA certificate of commitment. Essentially, this certificate shows you have the proper approval for the loan.
4. Supplemental VA Loan
Supplemental VA loans are also a possibility. To qualify, these loans roll into your mortgage, which you’ll need to have with the VA.
It’s great for making improvements to the home, although it doesn’t cover everything. For example, you can’t use it to install a hot tub or a swimming pool.
You’ll need a statement of reasonable value to get a supplemental loan under $3,500. However, you’ll need to have the property inspected if it’s more than that. After that, you’ll receive a notice of value.
When you have the notice, you can receive approval from a VA expert and get to work on making repairs to the house.
If you don’t want or can’t qualify for other VA loans, you’ll want to make sure you consider a supplemental VA loan next. They combine with other loans you might already have, so they have plenty of uses for costly repairs.
Renovations Approved For VA Loans
VA home improvement loans do come with a few rules. You’ll want to ensure you use the funds to make approved changes. Here’s a quick list of what you can do:
- Flooring and roof repair
- HVAC repair or installation
- Lead paint removal
- Foundation repairs
- Electrical repairs
- Added energy efficiency
Overall, there’s a lot that you can do with a VA loan! You’ll want to consider all your options and reach out to the professionals at the Veterans Benefits Administration if you need assistance or have any questions.