In which scenarios is the VA Renovation Loan useful?

This can be an ideal program for veterans or military personnel who want to purchase a fixer upper while also taking advantage of the 100% financing option available to them as a result of their service to our country. Military families often move frequently as they take on new assignments throughout the career of the service member(s). When relocating to a new part of the country, especially on a short timeframe, it may be challenging to find a home that meets the needs of the buyers. Trying to purchase in a particular school district, close to base where there is the support of other military households, or within commuting distance of a spouse’s new employer can make things even more difficult. Opening the search to include properties in need of a few repairs or updates can make it much easier to find that ideal home. The VA Renovation Loan can also come into play on transactions where it was not part of the original plan. As touched on earlier it can be used to save the deal when issues are discovered through the inspection. Perhaps the potential buyers have found a home they love, in the perfect location, but the home inspection reveals that the roof is in need of repair. The would-be buyers may not be able to afford to pay for the work out of pocket, and the sellers might feel they could easily sell the home as-is in the current market and are not offering to cover the cost of fixing the roof. The home will not qualify for VA financing until the repairs are complete. A VA Renovation Loan might be a great fit in this scenario, allowing the buyers to borrow the additional funds needed to pay for the roofing work, and saving them from beginning again in their search for a new home.

Buying a Home with a VA Renovation Loan

When purchasing a property with a VA Renovation Loan the plans for the work, including information on the general contractor, are evaluated with the other documentation during the underwriting phase. An appraisal will show the value of the home both before and after the renovation is complete. Once the work is finished there will be a final certification by a VA Inspector to ensure the home meets the property standards and is ready to be enjoyed by its new owners.

VA Renovation Loan Refinancing

Consumers are often surprised to learn that renovation loans, including the VA Renovation Loan, can also be used to refinance an existing mortgage. This can be an excellent alternative to a second mortgage or cash-out refinance* when the funds will be used to repair or update the subject property.

Other Programs to Consider

If the VA Renovation Loan is not an ideal fit for a particular scenario here are a few other products to explore:
  • For larger structural updates: FHA Standard 203(k) Loan
  • To finance luxury projects such as installing a pool or outdoor kitchen: Fannie Mae HomeStyle® Renovation Mortgage
  • Streamlined, simplified VA refinance option if repair costs are not needed: VA Interest Rate Reduction Refinance Loan (IRRRL)