Can I Remodel a House Using a VA Loan? The VA Renovation Loan Explained.
VA Renovation Loan: What is it?
Buying a home can have a lot of advantages but that doesn’t mean that a homebuyer won’t run into challenges! One of those happens to be when a buyer finds a home that they are keen on, but it has a lot of damages, making the buying process riskier. Turning to a loan in this scenario may be the best bet.
There are a lot of different types of home loans out there, however, the VA renovation loan is quite specific. It is also commonly referred to as the VA rehabilitation loan and has been around since 2018. This loan is specifically created for homebuyers who are purchasing a home that needs repairing or improving.
Move in ready homes are rare to find and the ones that are ready, are pretty pricey. Most homebuyers find it more appealing to inquire about homes that need some amount of work done. Fixer upper houses tend to be more affordable and they allow for the homebuyer to improve the home the way that they want, as opposed to a predetermined design or style.
However, even the fixer uppers require a fair amount of money to be put into the house. This is where a VA renovation loan comes into play. Eligible homebuyers can receive money from a VA renovation loan in order to make the necessary repairs and improvements.
We specialize in VA renovation loans! Our team of VA loan specialists is waiting to help you through this process. We answer some of the most frequently asked questions below, but if you’re ready to get the process started or if you have more questions then start by giving us a call today!
How Does the VA Renovation Loan Process Works?
Understanding how the VA renovation loan process works is important for someone considering making renovations to their home. The renovation loan, also referred to as the rehab loan will be lumped in with the original purchase VA loan. The advantage of this is that the homeowner won’t have to make two payments each month, at separate times. Instead, there will be one payment, once a month — including the original purchase price as well as the amount financed for the renovations.
When applying for a VA renovation loan, the homeowner has to outline the repairs, upgrades, and improvements that are being considered. One thing to note is that the main purpose of the VA renovation loan program is to make the home more VA eligible. And, outlining the planned renovations will allow the eligibility process to be easier. Specific details on the improvements must be stated to ensure that no details are overlooked — this includes everything from timelines to contractor information.
What’s the Purpose of a VA Renovation Loan?
VA renovation loans exist to ensure that the prospective home meets all requirements in order to be eligible for VA financing. In order to protect a homebuyer’s investment, there are minimum property requirements that must be met.
Due to the additional layer of repairs that comes along with VA renovation loans, the process can be lengthier than that of a traditional VA loan. However, this time commitment tends to be quite worth it, because, in the end, you’ll end up with a home that has a VA renovation loan to pay for repairs and improvements that are needed.
Who is Eligible for a VA Renovation Loan?
There actually aren’t a lot of requirements for being VA renovation loan-eligible. If a person is approved for a traditional VA loan then they are also eligible for a VA renovation loan too!
Homeowners that already have a VA loan are also able to get a renovation loan. This helps them finance any repairs, upgrades, or improvements that arise during the course of their traditional VA loan.
An advantage of getting a VA renovation loan while already having a traditional VA loan is that a homeowner can avoid having to get a cash-out refinance or a second mortgage — both of which could cause financial issues later on.
What are the Advantages?
The main advantages of a VA renovation loan is that homeowners can greatly improve the way that their home looks and functions. Although repairs and improvements have to be for VA eligibility purposes, they can still provide a significant renovation for a home in need. Things such as roof repairs or flooring replacements can really improve the home’s overall functionality and safety.
Another advantage is the ease of terms that a VA renovation loan provides. Although it will be a second loan, it does get lumped into the original purchase loan which is advantageous to someone looking to avoid a second mortgage or a cash-out refinance!
What are the Disadvantages?
A lot of people hear about the VA renovation loan and wonder if they can use it to completely remodel their home, and that is actually one disadvantage. A VA renovation loan does have a lot of specifics and requirements, it isn’t just a free for all to remodel any and everything.
Because there are tight requirements in ensuring a home is VA-eligible, only VA-approved renovations can be done. It is important to remember that although this may be seen as a disadvantage, the purpose of the renovation loan isn’t to make a dream home but rather a safe and livable home that meets VA standards.
There aren’t a lot of disadvantages to a VA renovation loan. For the most part, they can be quite helpful to someone who wants to make their home VA-eligible.
Types of Loans
A common question that people ask while getting started with the VA renovation loan process is what different types are available. Some of the most common repairs or renovations that are considered include the following:
- Plumbing system repair or replacement
- Roof repairs or replacement
- Energy-efficient upgrades
- Floor replacement
- Foundation repairs or improvements
- Furnace or air conditioning replacement or repair
- Electrical system repair or replacement
A lot of these are necessary in order for a home to function properly. And, each of these renovations are considered to meet VA loan eligibility, which is also referred to as MPR or minimum property requirements. Any home that is purchased with a VA loan must meet MPR which is typically determined by the VA. These MPRs ensure safety, comfort, and livability which will benefit the homeowners in the long run.
Are you considering a VA renovation loan? If so then reach out to us today! Our VA loan specialists would be happy to walk you through the renovation loan process so that your home is up to standard. Give us a call at 360-571-5626!