VA Renovation Loan
- Conforming Loan Limits only
- If Refinance transaction, limited to 90% LTV
- Total renovation cost may not exceed 50K
- Home must be habitable during renovation,
- VA Fee Appraiser must accept order
The Veterans Administration generally requires an annual fee of $100 per third party originator for each entity that sponsors their origination. AFR will now pay this fee on behalf of its brokers and correspondents on AFR-related VA loans!
VA Renovation Loan Basics
- Purchase and Refinance Options
- Used to finance minor remodeling and non-structural repairs
- There is no renovation consultant requirement
- Fully Amortizing Fixed Rate
- 10 year, 15 year, 20 year, 25 year, and 30 year term options
- One or Two Unit Homes
- Primary Residence Only
Low Mortgage RatesThe VA Renovation Loan makes it possible to finance both the purchase or refinance of a home and the cost of repairs or updates in one low rate, first mortgage loan. This can offer considerable savings when compared to a higher rate second mortgage, using other types of credit such as credit cards, or a home equity line of credit with a variable interest rate that could increase over time.
Who is eligible for a VA Renovation Loan?As with any VA loan the borrower must be a qualifying active duty member of the US military, veteran, or surviving spouse. Other requirements of this program include:
- Repairs must be minor remodeling or cosmetic in nature and not on the list of ineligible repairs
- Construction must be completed within four months of closing
- Only one General Contractor may be used
- General Contractor must be registered with the VA
- General Contractor must carry sufficient insurance through a current general insurance liability policy
- 620 minimum FICO score (640 Minimum Qualifying Credit Score for all qualifying borrowers when the loan amount is exceeding the VA county loan limits.)
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 LoanWhen 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 RefinancingConsumers 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.