How Does the VA Renovation Loan Work?
The VA Loan products are some of the most powerful tools when it comes to buying a home. Because they are available exclusively to military families and veterans and offer unparalleled benefits, taking advantage of the VA Loan can make it much easier and more affordable to get into your dream home. While buying a home “as is” is standard, some people prefer to buy a home that has great bones and give it a facelift. A common myth is that you are not able to use the VA Loan to renovate a home but in reality, the VA Renovation Loan lets you do just that! Keep reading to learn more about how this loan product works.
What exactly is the VA Renovation Loan?
According to a survey from Trulia, a whopping nine out of ten homeowners plan to remodel their house and more than a third of them plan to do so in the first two years. Since the demand is so high to customize a home, many people are looking for loan products that allow them some financial flexibility to be able to afford their dream home. VA Renovation Loans are designed for military members and veterans who are looking to buy a house that may need a facelift and would like to finance the entire project at once. With the VA Renovation Loan, the purchase price of the home and any repair / improvement costs are bundled into a single loan.
How do the finances work?
The single loan you commit to with a VA Renovation Loan includes the purchase price of the house and your expected costs for repairs / improvements. This means that the total loan you finance includes every element of the renovation process and is a reflection of it’s estimated “as-completed” value which equates to the estimated market value of the house once everything is finalized. The process of finalizing a VA Renovation Loan is almost identical to the process with a traditional VA Loan with the main difference being the appraised value and evaluation is given on the expected value of the home once it’s completed.
What are the guidelines?
Since the VA Renovation Loan is designed to help you renovate an existing house, a VA-approved appraiser will need to review specific documents. These documents include itemized quotes you receive from contractors or any repairs they intend to make, and the appraiser will use this to determine the expected value of the completed home. Property requirements are set by the VA and are similar to that of a normal VA Loan purchase.
What kind of renovations can I do?
The guidelines for the VA Renovation Loan program describe this product as “repairs that aren’t structural in nature.” This means that if you’re looking to give the home a facelift but not completely redo the structure of the home, you should be good to go. While this loan is a great option to customize a home to make it your dream home, there are limits and the total cost of any repairs generally needs to be less than $150,000.
Lenders that offer VA Renovation Loans
While there are thousands of lenders out there to choose from, very few offer the VA renovation loan. It’s important to work with someone who specializes in working with military families if you are looking to use a VA Renovation Loan. At MHS Lending, we are experts on working with veterans and military families and our mission is to help those who have served or are actively serving in the US military with their home buying journey.
If you’re looking to customize the home you want by bundling in repairs and improvements to your total purchase and still take advantage of the many VA Loan benefits like a $0 down payment and no PMI. Click Here to get started!