A VA rehab loan can also help veterans update or renovate their homes to meet new needs or to accommodate a disability. If you’ve been considering a home equity loan or a cash out refinance loan, a VA rehab loan might better suit your financial situation.
One of the best experiences about military service is the ability to come home to one’s family. Owning the home of your dreams might seem expensive, but VA rehab loans help veterans make a home purchase and turn a fixer upper into a place for their families to thrive.
Here are the many reasons you should consult with VA lenders on a VA rehab loan:
Reason 1: A VA Renovation Loan Raises Your Home’s Value
VA renovation loans work like home improvement loans–you can afford HVAC or plumbing upgrades, new insulation, a new roof, or whatever else your home needs to make it livable.
While you can’t use a VA renovation loan to purchase or install luxuries like a swimming pool, the value of these new installations can help raise the value of your home overall. If you go to sell your home to find another primary residence, you might be able to make a profit based on your new renovations or additions.
Reason 2: A VA Renovation Loan is Backed by the Department of Veterans Affairs
The Department of Veterans Affairs backs all VA loans, which means that these loans, although they come from private VA lenders, will come with some guarantee of a small percentage of the loan that will be paid back by the VA.
All veterans who have served a certain amount of time in the military or the National Guard–typically more than 90 days–are eligible for full entitlement on their first VA loan. Once that loan is paid off, their full entitlement is typically restored. Veterans who have only some entitlement left may have loan limits on a VA loan.
A VA renovation loan typically comes with a certain amount of limitations, depending on what you plan to do with the money and what kind of renovations you need to make on your home.
Reason 3: VA Loans Come with Competitive Interest Rates
Your monthly mortgage payment varies based on available interest rates. If you’re looking to apply for a VA renovation loan, you’ll want an affordable loan so that you can acquire home equity quickly, to have that financial line ready whenever you need it. Interest rates can skyrocket depending on the economy, making it cumbersome to continue paying off that loan.
While the interest rate on a VA loan is established by a lender, any lender that offers VA renovation loans will work with you to make sure you have a competitive and affordable interest rate. VA loans often come with more attractive interest rates than other types of renovation loans.
Reason 4: Several Types of VA Renovation Loan to Choose From
Many first-time home buyers might view a VA home improvement loan as something to use for their first home purchase, but even long-term homeowners can apply for a VA loan from trusted VA renovation loan lenders. Here are the types of VA renovation loan available:
VA Home Renovation Loan: This VA loan works as a renovation loan and a VA home loan. If you find a home that is worth around $300,000, and the VA appraiser finds that your home purchase will need about $15,000 in repairs to become habitable, then you can take out a single loan for $315,000. This is a great way to buy a fixer upper and pay off the renovation costs.
VA Supplemental Loan: This VA loan works like a home equity loan. Basically, if you’ve already purchased your home but would like to fix it up, a VA supplemental loan works like a rehab loan. These VA loans have a different set of requirements than a VA renovation loan would.
VA Energy Efficient Mortgages: These VA loans can be a simple personal loan to help cover the costs of installing energy-efficient equipment or energy-efficient home appliances. You can install the equipment yourself without needing a VA appraisal or a VA approved contractor.
Reason 5: No Down Payment Needed on a Regular VA Loan
All VA loans do not require a down payment, regardless of your financial history. Many VA lenders tend to offer loans based on your entire financial history, not just your credit score or income. If your home has some repair costs that come with it, a VA renovation loan can help you afford a home of your own and afford to repair it without a down payment.
Reason 6: No Private Mortgage Insurance Needed on VA Renovation Loans
Most conventional loans require a down payment or private mortgage insurance when it comes to a mortgage. Fortunately, the VA loan program does not require PMI on any loan, whether its an existing mortgage, a traditional VA loan, or a VA rehabilitation loan. This perk can keep the total cost of your home at a reasonable price and can make it easier to pay back the loan over time.
How Can I Get a VA Renovation Loan?
In order to get a VA renovation loan to make home improvements, you must choose one of the many VA loan options offered by a VA lender like Security America Mortgage.
VA Renovation Loans and Their Requirements
Anyone who applies for a VA renovation loan must be a veteran who has served more than 90 days in the military or the National Guard. They must also get an accurate bid from a VA-approved contractor, and an accurate bid of the as-completed value from a VA appraiser. The home needs to be a primary residence, and any repairs must be completed by a licensed VA contractor who has a VA builder ID number.
The repaired home will need to meet the VA’s minimum property requirements within 90 days of closing the sale on the home. Many VA lenders will require a certain credit score and a reliable source of income to be eligible for VA financing on home repairs.
Any VA renovation loan work cannot be considered cosmetic in nature. So if you want to install a swimming pool or a BBQ pit in your backyard, a conventional loan might work better for you to finance home improvements.
VA Supplemental Loans and Their Requirements
If you already own a home and are interested in a VA renovation, you can apply for a VA supplemental loan to make repairs on your home. If you already have an existing loan that is either a VA mortgage loan or another form of VA loan, you will be limited in loan value based on how much entitlement you have left on your certificate of eligibility.
Keep in mind that instead of the one monthly mortgage payment, you’ll have to make two payments–one on your home purchase loan and one on the VA rehab loan. The interest rate on VA supplemental loans is also higher than it would be on a standard VA renovation loan.
Why Should I Get a VA Supplemental Loan?
These loans are better options than VA cash out refinance loans, which may not be available in places like the state of Texas. Additionally, no more than 30 percent of renovation loans from the VA can be used for non-fixtures, home appliances, or new equipment like heating or washing machines.
For homeowners that are applying for more than $3,500 in a VA renovation loan, they must provide a notice of value to the VA appraiser, with a complete estimate of renovation costs.
VA Energy Efficient Loans and Their Requirements
Homeowners might not always want a VA energy efficient loan, but if you wish to install solar panels in your home (which come with huge tax benefits on a federal level and even on a state level based on where you live), VA energy efficient loans can help you improve the completed value of your home. They can also make it last longer overall.
How Much Do These Loans Allow?
Loan limits for these kinds of VA renovation loan rarely go higher than $3,000, depending on what the limits from lenders who offer VA renovation loans. Fortunately, for these types of home improvement loans, you don’t need a VA appraiser or a VA contractor. This VA home loan can cover the purchase price of your new equipment and you can install it yourself.
What VA Renovation Loan Alternatives Are There?
You don’t have to take out VA renovation loans to fix your home. Various other options exist to help you afford the repairs that your new home or old home needs. Security America Mortgage offers the below options–and top customer service along the way.
FHA 203 k loan: These kinds of renovation loans can help finance much needed repairs to your old or new home.
VA Cash Out Refinance Loan: VA renovation loan lenders can offer these kinds of loans which give you some cash to use in other areas. These types of loans are not available in the state of Texas.
Fannie Mae Homestyle Renovation Loan: This home improvement loan covers the cost of needed renovations without involving the VA.
Conventional Renovation Loans: If you don’t feel like going through all the work involved in a VA home improvement loan, then a conventional loan might work better for you.
Home Equity Loan: These loans don’t require all the work involved in VA renovation loans. Simply take out the value of your home and use the cash from the home equity line you already have.
What is the Difference Between VA Renovation Loans and VA Rehab Loans?
There is no difference between VA renovation loans and VA rehab loans other than the name.
Who Counts as a VA Contractor?
VA contractors can be difficult to find if you don’t know what you are looking for. Those who apply for a VA home loan for the purpose of renovating the home will have to only use one general contractor over the course of four months.
The contractor has to be registered in the VA as a trusted contractor. They will have to give you a written estimate for how much it will take to repair a home so that it meets VA requirements, state requirements, and local requirements so that it is livable. You will need this written estimate before applying for the loan.
What Does a VA Contractor Need?
This contractor will need to carry sufficient insurance and a general insurance liability policy to avoid additional complications. Research contractors to make sure that they do reliable work and won’t cause long wait times. Remember that you have four months to get your renovations done to meet the requirements of the loan.
Can I Remodel My Home with a VA Loan?
Major remodels are not covered by VA home loans, so when looking at a house, make sure it doesn’t need a complete overhaul to make it habitable. These are not investment loans, but rather loans that make it possible for you to own a home. Security America Mortgage recommends keeping renovations under $35,000.
How Much Can I Take Out as a Loan?
Any renovations that require more than $200,000 will need a review from the lender, while any renovations greater than $50,000 will require a Federal Housing Administration HUD consultant. This process will require more paperwork. It may also take more time overall to get approved.
Why Should I Think About Other Options?
VA renovation loans come with a few downsides. You can’t take out these kinds of loans in specific geographical locations, such as Hawaii. You also cannot perform repairs that aren’t approved by a lender. So if a contractor finds out that your home needs additional work in the middle of the repairs, they can’t perform those repairs unless the lender agrees to it.
The loan paperwork is intense, and takes up much time. Finding a reliable VA contractor will also involve research and planning. You can’t remodel your home, and you can’t add new rooms or a second floor to your home. If you need to dig up your entire backyard, these kinds of loans won’t work for you.
However, the benefits to a VA loan might outweigh the downsides, especially since you don’t need a down payment, you can compile two loans into a single loan if you are buying a home, and you don’t need PMI.
Call Security America Mortgage Today for a Quick Consultation!
Trusted loan officers from Security America Mortgage can help you decide what kind of loan is best for you and your family. You can get the funds you need to improve the quality of life for your family and to make your own quality of life better overall. Creating a home that can be passed down through generations involves much effort and planning, and at Security America Mortgage, we respect that.
If you’re eligible for a VA renovation loan, check out our VA loan calculator to see how much you qualify for and to get a general estimate of how much you’re going to commit to in terms of monthly payments. Our experts can help you get a better idea of what to expect and can walk you through the timeline of the loan. We’ll be here from start to finish so that you can get what you need and use it in the best way possible.