November 28th, 2019 7:19 AM by Jackie A. Graves, President
A VA renovation loan rolls the cost of repairs into a VA mortgage
or VA cash-out refinance.
VA loans make homeownership possible for thousands of veterans and
military service members every year. The loans have no down payment or mortgage
insurance and often have lower mortgage rates than other home loans.
those well-known benefits, you can use a VA loan to buy a fixer-upper or
renovate your current home. Here are four VA home improvement loan options.
1. VA cash-out refinance
If you owe less on your mortgage than your home is worth, you
might be able to tap into the home equity with a VA cash-out
refinance. You can use the cash-out money for any purpose, including
home improvements. You can refinance a conventional or FHA loan into a
VA-backed mortgage with this option as well.
2. VA renovation loan
for alteration and repair let you buy or refinance a home and roll the cost of
improvements into your mortgage.
option, you’re not limited to homes that already meet the VA’s minimum property
requirements. You can use the repair money to bring the home up to the VA’s
renovation loan might be worth considering if you already own a home that needs
some TLC. Usually, with a VA cash-out refinance, the loan amount can’t exceed
the current value of the home. But with a VA renovation cash-out refinance, the
maximum loan amount is determined by the expected value of the home after
repairs are complete.
Be aware that lenders can charge a construction fee of up to 1% or
2% of the amount of VA renovation loan amount. The fee is in addition to the
loan origination charge and the VA funding fee.
3. VA loan for energy efficiency
You can roll the cost of energy efficiency improvements
into a VA purchase or refinance loan. Acceptable improvements include things
like thermal windows, insulation and solar heating or cooling systems. The
amount of required paperwork depends on the project’s cost.
4. Supplemental VA loans
supplemental loan is another way to finance home improvements. To qualify, your
home must be financed with a VA mortgage. The supplemental loan can be
structured as a second mortgage, included in a refinance or added to the
existing mortgage. You can use the money for projects to improve your home’s
basic livability, but not for extras like swimming pools.
If the cost
is $3,500 or under, you’ll need a “statement of reasonable value” signed by a
VA-approved appraiser. If the cost of repairs and improvements is more than
$3,500 the lender will require a compliance inspection and a “notice of value”
Home renovation loan alternatives
have to limit yourself to VA loans for home improvements. Here are other options
to buy a fixer-upper or finance repairs of your current home.
A home equity loan or home
equity line of credit, known as a HELOC. If your home is worth more than you
owe on your primary mortgage, you can borrow against some of the difference
with a home equity loan or
An FHA 203(k) loan. An FHA 203(k) loan lets
you buy or refinance a home and roll the renovation costs into the mortgage.
A conventional home
renovation loan. The Fannie Mae Homestyle loan is
similar to the FHA 203(k) loan, but credit score requirements are stricter and
rules about renovation work are more lenient. The Freddie Mac CHOICERenovation
loan also lets you roll the costs of home improvements into the
mortgage. Additionally, the CHOICERenovation loan lets you finance
disaster-proofing improvements and may offer down payment credits for sweat
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