Home ownership is an expensive pastime. Whether you’re buying, building, or renovating to sell, you need to have a pretty impressive wad of cash to do it up right. If you know you’re sh*t out of luck where your finances are concerned, but you still really need to embark on this renovation project, you might want to look into VA renovation loans.
If you’ve never heard of VA renovation loans before, we’re about to give you the lowdown on what you can expect, how much you can borrow, how to apply, and what the requirements are for doing so.
- What Is a VA Renovation Loan?
- Benefits of a VA Renovation Loan
- How To Apply for a VA Home Improvement Loan
- What Are the Requirements for a VA Loan?
What Is a VA Renovation Loan?
The VA renovation loan is a type of supplemental VA home loan. You can use it for many different kinds of home improvements, as long as they are improvements that enhance the livability, stability, or safety of your home. Sorry, you can’t add an Olympic-sized swimming pool just because you want one.
If you’re renovating to sell, get a VA home loan! If you’ve just moved into a “fixer-upper” (a.k.a. a cheap, heaping pile of garbage), you can use VA home loans to make it livable again.
You may have heard of a VA renovation loan being called a VA home improvement loan, a VA home renovation loan, or anything along those lines. At the end of the day, it’s all the same thing: a loan backed by the VA for you to renovate part of your existing or new home.
Benefits of a VA Renovation Loan
Because a VA rehab loan is a type of VA home loan, you’re entitled to many of the same benefits that you’d get with other types of VA loans.
- A VA renovation loan lets you buy a home with no down payment and no PMI (if you’re planning on buying, then renovating). You can, thusly, borrow the entire amount of what the home will be worth post-renovation.
- Think of it this way. You want to buy a $200,000 home that needs relatively significant repairs that total $50,000. You don’t have to just borrow the $50,000. You can borrow $250,000 all at once. Everything is lumped together, making for a much easier borrowing (and paying-off) experience.
- VA renovation loans are a lifetime benefit, meaning you can use them more than once.
- A VA renovation loan can make buying any house a little bit more accessible since you can more easily fix up homes within your budget.
Renovation loans for Veterans are also particularly useful so you’re not tempted to dip into any of your retirement savings in order to improve your home or buy a better one that’s just out of your budget.
Think of this easier home improvement process as a tiny bonus for your years of service.
Looking for ways to save for your renovations while still having fun? Read our blog 6 of the Best Disney Discounts, Special Offers, Deals for Veterans
How To Apply for a VA Home Improvement Loan
Just knowing how to get a VA home improvement loan is half the battle. Chances are, you’re already eligible, so you should focus your efforts on applying for your loan, finding the right house, and looking for certified builders.
1. Apply for Your COE
Before you apply, you need to make sure you have a copy of your discharge/separation papers (DD214), as you’ll need these to prove your eligibility. Then, you’ll need to apply for a Certificate of Eligibility, which you can do through the VA’s eBenefits website.
If you’re one of the older Vets who longs for the days of the Pony Express, you can apply by mail, too. You just have to fill out this form (VA Form 26-1880) and mail it to the address listed for your state. There are nine different offices depending on which state you live in, so make sure you send it to the correct location!
2. Select Your Lender
There are many VA home loan lenders you can choose from to get your VA renovation loan. Look through your options and pay special attention to their credit requirements. One of the most highly-recommended VA home loan lenders is Churchill Mortgage.
At Churchill Mortgage, they do things differently than your average mortgage company. Churchill understands everyone’s goals (both financially and in life) are different, which means your home loan needs will be different too. Their goal is to make sure you are set up for financial success and help give you the smartest path for homeownership, regardless of your starting point.
Put simply: Churchill is a lender with a different mission: Doing what’s right for you.
3. Select Your Contractor & Get a Quote
Your contractor must be approved by the VA and have a VA builder ID number.
4. Get Your VA Appraisal
Your lender will then request an appraisal of the house you’re looking to renovate and determine the value of the house in addition to the value of renovations you’re looking to undergo.
5. Lender Review
The lender will review your appraisal alongside other factors, like your credit and income. Then they decide if they want to accept your application for a loan.
6. Closing & Renovation
Once your application is accepted, you can close on the home and accept the loan. Then, you’ll need to make sure that the renovations are being carried out as planned and completed within 120 days of the closing date.
7. Final Review
Finally, your home will be subject to one last review by a VA appraiser to make sure everything fits within the requirements for your loan, as outlined below.
What Are the Requirements for a VA Loan?
The VA doesn’t require any specific credit score or financial history to apply for a VA renovation loan. However, they do require a certain amount of subsequent days of service. Additionally, many individual lenders may impose credit score restrictions and maximum borrowing allowances when you go to take out a VA renovation loan.
The maximum limit for a VA renovation loan is $50,000.
So if you’re looking to borrow more than that, you might need to look elsewhere. (But you likely won’t need more than that for a simple renovation.)
On average, you’ll also need to be looking at a credit score of around 620 to qualify with most lenders for a VA renovation loan.
There are also stricter requirements concerning the home and construction.
To qualify for a VA renovation loan, the VA requires that:
- The renovation is NOT aesthetic in nature, that it is strictly to improve the safety or livability of the home.
- The home must be intended to be your primary residence.
- Your contractors must have a valid VA builder identification number.
- All construction should be complete within 120 days from the day you closed on your house.
- Once renovated, your home must pass all minimum property requirements and VA appraisal.
If you’re finding it difficult to locate a move-in-ready home with your allotted budget, applying for VA renovation loans is a great option to make the process a lot easier and more affordable. Sure, a loan is a loan is a loan. Thankfully, VA-backed loans are a lot more forgiving and beneficial to you than a standard loan, so count your blessings and get to applying!