VA Home Improvement Loans: All About VA Renovation Loan
If you are connected to, or a current or former member of, the U.S. military, you may have heard of VA loans, which are mortgage loans that the federal government guarantees through the U.S. Agency for Veterans’ Services (VA).
The VA provides loans designed exclusively for home remodeling or improvement. We’ll cover all you need to know about selecting the best VA loan for home improvements in this guide.
What Is a VA Home Improvement Loan?
A VA home improvement loan is a specific kind of mortgage that can be used to refinance an existing mortgage while also financing repairs and renovations to the home you already own.
Military personnel who are serving or have been honorably discharged, as well as surviving spouses, may be eligible for VA loans, which are backed by the US Department of Veterans Affairs.
How Do VA Home Improvement Loans Work?
The VA itself does not manage loans. In order to guarantee the loans, it collaborates with banks and other creditors. A VA home improvement loan is intended for remodeling a home rather than just buying one, and is often referred to as a “VA renovation loan” or “VA rehab loan.”
Usually, a VA mortgage includes funds for home improvements. They provide debtors with the opportunity to buy property in need of renovation and transform it into a livable space. If your house requires remodeling, you can also qualify for a VA home improvement loan when refinancing your mortgage.
What Are the Requirements for VA Home Improvement Loans?
You would need to fulfill the following criteria in order to be eligible for a VA home renovation loan:
- Certificate of Eligibility (COE): This certificate informs creditors of VA renovation loans that you are qualified to submit an application for a loan based on your military service record and/or current active duty status.
As soon as you decide to submit an application for a VA loan, you must first establish your status as a veteran, military member, or surviving spouse. The applicable military service must fulfill one of the following criteria in order to be eligible:
- During the Vietnam War, the Korean War, or World War II:
- Possess 90 days of active duty.
- Be let go due to a handicap sustained while servicing.
- Throughout the Gulf War:
- Possess 24 continuous months of active duty.
- If you are released other than for dishonorable reasons or a disability-related to your service, you must serve a minimum of 90 days or the whole period assigned to active duty.
- Be let go due to a handicap sustained while servicing.
- During times of calm:
- Possess a minimum of 181 days of continuous active service.
- Be let go due to a handicap sustained while servicing.
- Credit rating requirement: There is no required credit rating for the VA. However, a lot of VA creditors typically demand a minimum credit rating of 620.
- Types of Renovations: Renovations must be typical of those carried out on residences in your neighborhood that are comparable. They must also make the necessary improvements to the house to meet minimal VA property requirements.
- Qualifying Property: The house you want to refurbish must be your primary residence.
Pros and Cons of VA Home Improvement Loans
The VA home improvement loan has various pros and cons to consider, much like other loan types.
Let’s begin with the pros:
- The benefits of a VA loan are yours. There is also no requirement for private mortgage insurance and no down payment.
- Numerous banks, credit unions, and mortgage creditors are partners of the VA.
- It’s possible to forego the VA financing charge. This frequently occurs in situations involving disability or death due to service.
- Three more renovation loan options are offered in addition to the VA loan. They give you the option of a significant overhaul or a targeted repair or improvement.
Now for the cons:
- A particular standard of service is required to obtain a VA loan. This could last as little as 90 days or as long as six years.
- Finding a creditor isn’t always possible. For instance, few creditors have experience with loans for alterations and repairs.
- Most debtors are required to pay the VA financing fee. The funding fee raises the loan’s cost by 0.50 to 3.60 percent.
- Only specific types of modifications are eligible for VA renovation loans, and they must be equivalent to those in adjacent, similarly priced houses.
Alternatives to VA Home Improvement Loans
It can be difficult to find a mortgage creditor that provides a VA renovation loan, so if you’re having trouble, think about one of these options:
- FHA 203(k) Loan – For those looking to acquire a fixer-upper and include the costs of repair in the purchase loan, an FHA 203(k) loan may be a good fit. If you own a property and want to refinance your loan to make changes, you can also use it.
- Fannie Mae HomeStyle Renovation Loan – In contrast to VA rehabilitation loans, it offers a number of alternatives, such as the ability to roll mortgage settlements into the loan if the home is not yet habitable and the potential for down payment help.
- VA Cash-out Refinance – With a cash-out refinance loan, you switch your present loan for one with a bigger sum and take the cash difference. Some folks spend the cash on debt consolidation or home renovations.
- Home Equity Loan or HELOC – You can access the equity you’ve accumulated through a home equity loan or a home equity line of credit (HELOC).
- FHA Title 1 Loan – A homeowner with a low to moderate income who wants to make necessary home modifications (including ones to a manufactured house) may be eligible for an FHA Title 1 loan. These are supported by the federal government and made to improve the livability of your home.
