(Newswire.net — June 30, 2022) –VA home renovation loans are specially designed to give active service members and veterans low-cost and no-down-payment loans to purchase or fix homes that need additional improvements. Through these loans, eligible members can finance property purchase price, the necessary repairs, refinance, and renovate their existing homes.
While they are an excellent choice for service members, you should understand the various limitations surrounding this loan option. For instance, not all lenders provide VA renovation loans. Eligible members can secure these loans from Mhslending.com and other lending institutions. Below are a few things you should know about VA renovation loans.
Find out if do reserves qualify for VA loan, providing valuable insights into eligibility requirements for reservists seeking homeownership benefits.
What Is a VA Home Renovation Loan?
As mentioned, VA renovation loans are eligible for active-duty service members, reservists, veterans, a few eligible spouses, and other uniformed personnel, such as public health service officers. These loans ideally combine the purchase price of a property and the costs of unexpected improvements or repairs into one loan.
These loans are provided to eligible members under very favorable conditions. For instance, there are no minimum credit score requirements, few closing costs, and doesn’t require private mortgage insurance. Additionally, borrowers shouldn’t make a down payment.
The amount financed by the VA renovation loan depends on the value of the house “as completed.” This is the market value of the house after repairs are completed. To evaluate this value, homeowners should find itemized quotes from renovation contractors for the improvements they plan to make.
What Are the Eligibility Requirements for VA Home Renovation Loans?
You should meet the following requirements to be approved for VA renovation loans:
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Minimum service requirements
You can’t proceed with a VA renovation loan application if you don’t have a certificate of eligibility. This certifies that you satisfy the minimum service requirements for a VA loan. Active-duty service members and veterans are eligible for VA loans after 181 days during peacetime or 90 consecutive days of active service during wartime. Reserve members and National Guard become eligible after six years in service.
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Lender credit requirements
Besides meeting the minimum service requirements, you should meet your lender or bank’s minimum requirements. While the VA doesn’t set minimum credit scores for borrowers, lenders often have their standards. Some lenders may require a minimum credit score of 620 for borrowers to be approved for a VA renovation loan. Some may have higher score requirements. Borrowers should also have proof of a consistent source of income and satisfy the financier’s debt-to-income ratio.
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Eligible properties
VA renovation loans should only be used to purchase primary properties. Loans intended to purchase vacation properties, or flip homes won’t be approved.
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Allowed home improvements
Unfortunately, you can’t use VA renovation loans for all renovations or improvements in your property. VA renovation loans have limits. For instance, you can’t undertake major construction work, install a pool, improve the landscape, or add new floors or rooms. You also can’t construct a detached garage. Generally, anything that requires a structural engineering report isn’t allowed. However, you can use your VA renovation loan for the following improvements:
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Repair or add windows, doors, and siding
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Repair or add a new roof or gutters
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Improve insulation
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Install new water heaters or HVAC system
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Treat mold or remove lead paint
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Replace or repair flooring
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Accessibility updates
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Updates that improve energy efficiency
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Weatherize
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Replace or repair plumbing or electrical systems
Any home improvement funded by VA renovation loans should improve liability or increase property value.
VA Home Renovation Loan Options
1. VA cash-out refinance
VA cash-out refinances are probably the best option for homeowners who want funds to cove their home renovations. It is a form of refinancing, which replaces your existing VA loan with a larger loan. The new loan pays off any existing old loan, and borrowers get the remaining balance in cash.
The best thing about VA cash-out refinance is that it doesn’t add extra payments like other VA renovation loan options. You can use these funds to cover large-scale and structural home renovations. If there is a remainder, you are free to use it on non-home-related projects.
However, with such flexibility comes a lot of approval restrictions. For instance, borrowers should have sufficient equity in their properties. Your home equity should be worth more than your loan balance. You also need a certificate of eligibility, and the property must be your primary residence.
2. VA energy-efficient mortgage
VA energy-efficient mortgage best suits homeowners who want to install home upgrades that improve their property’s energy efficiency and general environmental impact. These loans can fund improvements to your property’s windows, doors, heat pumps, siding, roofs, HVAC system, doors, insulation, and weather stripping.
All improvements should be permanent fixtures, so you can’t use this loan to buy appliances and removable units. The paperwork required for this loan depends on the estimated project cost. For instance:
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For $3,000 and less – The VA outright assumes that the amount saved from your utility bills will offset the cost of home improvements.
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For loans between $3,000 and $6,000 – The lender reviews your home improvement plans to ensure that the increase in mortgage repayments doesn’t exceed the monthly utility bills saved by improvements. Ideally, the amount you save by making these improvements should be more than the additional monthly mortgage payments.
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Loans more than $6,000 – Lenders will subject amounts greater than $6000 to more scrutiny. Borrowers should also provide a certificate of commitment from the VA.
These renovations should meet the state and federal current building codes and adhere to lender guidelines. Homeowners should also consult qualified experts for a home energy audit to evaluate if the improvements are necessary.
3. Supplemental VA loans
VA also guarantees supplemental loans to improve your property’s basic conditions. However, these loans are only available as refinance, which replaces your current VA loans, or secondary to your existing mortgage.
Endnote
VA loans are greatly beneficial, and VA renovation loans are extremely useful for service members, veterans, and other eligible persons who want to renovate or improve their current and future homes. The only challenge is finding a good lender to finance your planned home improvement projects. Eligible persons should search extensively to find a loan arrangement and lenders that suits their interests.