Mission
VA helps Servicemembers, Veterans, and eligible surviving spouses become homeowners. As part of our mission to serve you, we provide a home loan guaranty benefit and other housing-related programs to help you buy, build, repair, retain, or adapt a home for your own personal occupancy.
VA Renovation Loan
What is the VA Renovation Loan?
The VA Renovation Loan brings together some of the most innovative and attractive features of several popular mortgage programs. It provides no money down financing that covers not only the current value of the property, but the cost of remodeling and repairs as well. This program is intended for minor updates and work done on the home, with no minimum or maximum renovation cost requirement.
VA Reno Program overlays and eligibility during the pandemic include:
- Conforming Loan Limits only
- If refinance transaction, limited to 90% LTV
- Total renovation cost may not exceed $50,000
- Home must be habitable during renovation
- VA Fee Appraiser must accept order
Because the Veteran Administration requires that a property meet minimum property standards in order to qualify for VA financing, it is not uncommon for deals to fall through during the inspection phase. The seller may not want to pay for all the repairs needed to ensure the home meets the VA’s high standards. With a VA Renovation Loan the buyers may be able to move forward with the purchase of a home they love, while borrowing the additional funds needed to fix the issues with the property, still with zero down payment.
The Veterans Administration generally requires an annual fee of $100 per third party originator for each entity that sponsors their origination. AFR will now pay this fee on behalf of its brokers and correspondents on AFR-related VA loans.
VA Renovation Loan Basics
- Purchase and refinance options
- Used to finance minor remodeling and non-structural repairs
- There is no renovation consultant requirement
- Fully amortizing fixed rate
- 10-, 15-, 20-, 25-, and 30-year term options
- One- or two-unit homes
- Primary residence only
What are the benefits?
100% Financing
VA mortgages offer one of the only no money down home financing options available in the marketplace. This is a huge advantage to qualifying veterans, military personnel, and their families, who can become homeowners without waiting many years or depleting their savings.
Low Mortgage Rates
The VA Renovation Loan makes it possible to finance both the purchase or refinance of a home and the cost of repairs or updates in one low-rate first mortgage loan. This can offer considerable savings when compared with a higher-rate second mortgage, credit cards, or a variable-rate home equity line of credit.
Who is eligible for a VA Renovation Loan?
As with any VA loan, the borrower must be a qualifying active-duty member of the U.S. military, veteran, or surviving spouse. Other requirements include:
- Repairs must be minor remodeling or cosmetic in nature and not on the list of ineligible repairs
- Construction must be completed within four months of closing
- Only one General Contractor may be used
- General Contractor must be registered with the VA
- General Contractor must carry sufficient insurance through a current general liability policy
- 620 minimum FICO score; 640 minimum when the loan amount exceeds VA county loan limits
In which scenarios is the VA Renovation Loan useful?
This can be an ideal program for veterans or military personnel who want to purchase a fixer-upper while taking advantage of the 100% financing option available to them as a result of their service.
Military families often move frequently as they take on new assignments. Opening the search to include properties that need a few repairs or updates can make it easier to find the right home in the right location.
The VA Renovation Loan can also help save a transaction when inspection issues are discovered and the property will not qualify for standard VA financing until repairs are complete.
Buying a Home with a VA Renovation Loan
When purchasing a property with a VA Renovation Loan, the plans for the work, including information on the general contractor, are evaluated with the other documentation during underwriting. An appraisal will show the value of the home before and after renovation. Once work is finished, a VA Inspector completes a final certification.
VA Renovation Loan Refinancing
Renovation loans, including the VA Renovation Loan, can also be used to refinance an existing mortgage. This can be an alternative to a second mortgage or cash-out refinance when the funds will be used to repair or update the property.