Find a VA-Approved Lender – Look for a lender that offers VA Home Improvement Loan and can guide you through the process. The lender will check your eligibility and help you obtain a Certificate of Eligibility.
Obtain an Appraisal – An inspector will evaluate the property’s value along with the estimated cost of renovations. This step is critical when applying for a VA Home Improvement Loan, as it helps determine how much you can borrow.
Basic Rehab Loans
For veterans who want to renovate their home, there are several options. One option is a VA renovation loan. These loans are used to purchase a home and finance the repairs required to meet VA standards.
Before a loan can be closed, a contractor must submit plans and bids for the work to be done. A VA inspector will then assess the property and certify that the repairs meet standards. The renovation loan program also includes contingency funds to cover any unforeseen expenses during the project.
Another option is a VA supplemental mortgage, which can be added to an existing loan or refinance. These loans are used to make improvements that improve a home’s livability and utility. Luxury upgrades such as a swimming pool or a jacuzzi are not permitted with these loans. These loans are not as flexible as VA renovation loans. You may have to shop around for lenders who offer these loans.
Energy Efficient Loans
Whether you’re a current VA loan holder looking to make energy efficient upgrades or you are planning on buying an older home with an inefficient heating system, there are resources and financing options available. Energy efficiency improvements are an excellent way to reduce utility bills, increase a home’s value and contribute to a greener environment.
The VA Energy Efficient Mortgage (EEM) program allows qualified veterans to add the costs of energy-efficient improvements directly into a new or existing purchase or refinance loan, folding them into monthly mortgage payments. Eligible improvements include solar panels, thermal windows and insulation.
To qualify for this unique option, borrowers will need to meet the typical requirements for a VA loan including a Certificate of Eligibility and supporting financial documents. A qualified lender is also essential for completing the application and ensuring accurate documentation. An experienced VA loan officer is able to help navigate these requirements. They can also assist with researching state energy tax credits and funding opportunities.
Specialty Loans
Unlike a home equity loan or line of credit, a VA home improvement refinance is guaranteed without consideration for the amount of equity in your property. However, lenders will typically look at your debt-to-income ratio and income verification. Lenders will also require an upfront funding fee for this type of VA refinance.
VA supplemental loans are meant to finance renovations and repairs that ensure your home meets VA minimum property standards. This type of renovation refinance can be financed separately or added to an existing mortgage and may require an inspection after completion. It’s important to note that a VA supplemental loan cannot fund luxury upgrades like pools, but can only make necessary improvements to your home’s livability.
You can also use a home equity loan or HELOC to complete a major remodel, but these types of second mortgages typically have higher interest rates than a VA refinance or renovation loan. These are great options if you don’t want to pay the upfront VA funding fee or can’t afford to wait for the renovations to be finished.
Renovation Loans
VA renovation loans are designed for veterans who buy a home that requires significant repairs or renovations. They can also be used to make improvements in conjunction with a purchase loan or an existing mortgage. The VA will require itemized estimates from registered contractors and a subsequent inspection to determine whether the work meets VA requirements.
The benefits of these loans are substantial. They can help expand the housing options for service members by allowing them to consider homes that might otherwise be outside of their budgets. They can also reduce monthly payments by rolling the cost of renovation into the purchase or refinance loan.
These types of loans are subject to strict guidelines, including the use of a third-party contractor for all work. Lenders may also have minimum credit score requirements and debt-to-income ratio standards, which can impact loan terms and approval speeds. These restrictions are designed to ensure that the loan amount is appropriate for the livability of the property and that the renovations meet VA standards.\=