The VA renovation program is an incredibly useful way for eligible military members to turn a mediocre house into their dream home.
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A VA renovation loan (also called a VA rehab loan) is a VA home loan with a renovation component. In other words, you are financing the renovation costs into the loan.
VA home loans have very specific minimum property requirements, also called MPRs. These are addressed in Chapter 12 of the VA Handbook. The VA says the home needs to be “safe, secure and sanitary.”
The MPRs cover a variety of issues, including but not limited to:
– Adequate heating systems
– Adequate roofing
– Crawl space requirements
– Proper utilities (electricity, water, gas, etc.)
– Lead-based paint safety
– Access to the home and property
Additionally, the home cannot have any sort of termite damage.
But what if the home you are thinking about purchasing does not meet these guidelines?
The seller can go and fix the defective items before closing, but in many cases, they cannot afford to make those upgrades.
The VA renovation program allows you to buy a home not meeting VA minimum property requirements.
For more info about VA minimum property requirements, check out this video.
Veterans like you struggle to find available inventory. Even with higher rates, there are more home buyers than ever right now that you are competing against. A VA renovation loan can help you expand your reach and find a home that suits your needs.
Multiple studies have shown that homes in good condition will sell for more money than homes that need work. By using the VA rehab program to buy a fixer-upper home, you will most likely save money in the long run, even after the cost of repairs are considered.
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While the VA home loan cannot be used to build a rental portfolio, you are allowed to buy up to a four-unit property, as long as you live in at least one of the units. You can use the VA renovation program on a multi-family home.
Personal loans for home repairs can get expensive quickly. By using a VA renovation loan, you combine the debt for the renovation and the debt for the home purchase into one monthly payment, which could save you thousands of dollars in interest.
When you are using a VA renovation loan, you can make the home how you want it. It’s a lot easier to get those things done at the time of purchase instead of trying to make improvements after you move into the home.
If you are a veteran who needs a handicapped-accessible home, you will love the fact that the VA renovation loan allows upgrades for handicapped accessibility.
The VA rehab program allows any upgrades for energy efficiency. These can save you thousands of dollars in the long run.
The VA outlines their guidance for the VA renovation program in Chapter 7, Section 4 of the VA Handbook.
The guidance is extremely vague. A screenshot of that guidance is below.
Because the guidance is so vague, lenders have created their own guidance around the program.
You will see many posts stating that certain rules are VA-specific rules, but this is not the case. In most cases, these rules are lender rules (also called lender overlays), not VA rules.
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The VA does not set specific repair limits for the VA renovation program.
If you have been searching this topic at all, you may see reports of different numbers regarding how much the VA repair limit is.
These are lender specific rules, not VA rules.
I know of one lender that has no repair limits at all. If the repairs make sense for the property, they will do it.
However, most lenders set their repair limit between $50,000 and $100,000,
Each lender sets their own standards for repairs, but there are some common communities among the different lenders.
Some examples of eligible repairs are fixing lead-based paint and connecting water and public sewage. eliminating obsolescence, mold remediation, repairing roofing, siding, gutters and downspouts.
Additionally, other great uses of VA renovation loans are installing fences, driveways, walkways, and non-structural kitchen and bathroom remodeling.
There is no official guidance regarding ineligle repairs on the VA renovation program.
However, every lender I’ve talked to has stated that the following repairs are ineligible for VA renovation financing: major structural modifications, oil tanks, luxury improvements, and landscaping.
If you require these types of repairs, you may want to consider the 203k or the Fannie Mae Homestyle program instead.
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The FHA 203k program is a great alternative to VA renovation. The 203k offers a way to finance structural and major repairs that are not available on the VA renovation program. Additionally, 203k allows for delayed payment during the renovation period.
Fannie Mae Homestyle can be a good alternative to VA renovation if you are doing a lot of luxury upgrades to the property. Unfortunately, luxury upgrades like a swimming pool or a hot tub are not allowed on VA reno.
If you are considering VA renovation because the home does not meet minimum property requirements, having the seller fix the home prior to closing can be a quicker and easier method to getting the home up to code.
If you already own the property and the repairs aren’t very large, a VA cashout refinance may be a quicker and simpler alternative to consider.
If you already own the home and need to get some repairs done, a home equity line may be something to consider. If you have a low rate on your existing first mortgage, this option is especially attractive.
Getting a home improvement loan from the contractor can sometimes be better than using VA renovation financing. Like all financial decisions, you need to weigh the pros and cons of every option.
Depending on your situation, you may be able to fix up the home with a grant. Some examples of grants avaialbable for veterans looking to renovate at home inclue: Habitat For Humanity Veteran Repair Program, and the VA Specially Adapted Housing Grant
State and local governments also have grant programs for home repairs. Here is a grant program in Montgomery County Ohio from Countycorp.
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The VA renovation loan is a great program, but unfortunately, very few mortgage companies offer it.
This program was suspended during Covid due to appraisal issues, but luckily several lenders brought the program back over the past year.
Even worse, very few loan officers know how to process VA rehab loans properly.
Luckily, as a mortgage broker, I have access to 110 lenders, including 3 lenders that offer the VA renovation program.
Additionally, since most of my mortgage business is VA-focused, I have the experience to make it happen for you.
Yes, you can buy a foreclosure with a VA renovation loan, assuming there are no structural repairs needed.
The VA does not have any rules against buying a home at auction but keep in mind that most auctions will only accept cash offers.
Yes, A VA renovation loan can be used to buy a HUD foreclosed home.
The VA renovation loan program does not allow you to delay occupancy during the repair period. Standard occupancy guidelines would apply. These guidelines are 60 days after closing, which can be extended up to one year with extenuating circumstances (typically because of a PCS).
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The home needs to be inhabitable within 60 days of closing. Each lender has their own timeline for how long you have to complete all repairs. Most have this limit set between 4 and 9 months.
Veterans using the VA renovation loan are not allowed to delay payments during the renovation period. If you have a larger project and need to delay payment due to not being able to occupy, the 203k may be a better option for you.
While the VA home loan does not have a minimum credit score, there are not any lenders currently offering the VA renovation program to a veteran with a credit score below 580.
Most VA eligible properties are also eligible for VA renovation. This would include single-family homes, multi-family homes, condos, and manufactured homes.
While there is no specific VA guidance regarding self-help, every VA approved lender does not allow self-help on the VA renovation program.
Anyone eligible for a VA home loan can get a VA renovation loan. This includes active duty military, reservists, veterans, National Guard and surviving spouses.
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Imagine how amazing it will feel to finally have the home of your dreams with no money down.
As you can see, VA renovation loan can be your solution to make your dreams a reality.
For more information, call or text me at 937-572-3713 or email at cscarpero@edgehomefinance.com
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