Sometimes you may come across a home that needs renovations. Because most lending programs, including the VA won’t allow a loan on a home that isn’t move-in ready, you may need a rehab loan.
If you are a veteran, you may be lucky enough to qualify for the VA Renovation Loan. This loan provides funds to buy the house as well as up to $35,000 for renovations. The purpose of the loan is to help veterans buy a home and fix it up so that it passes the VA requirements.
The VA renovation loan does require a little more legwork than the standard VA loan because you are buying a home that isn’t move-in ready. But it’s still rather easy to qualify for, as you will see below.
One Mortgage and One Payment
The nice thing about the VA rehab loan is that you only have one mortgage to pay. Technically, the money needed to fix the home up is a second loan, but the VA rolls it into one loan. This means you only have to manage one payment each month. It can be much easier to stay on track when the payments are simplified like that.
The VA will only allow renovations that are necessary to bring the home up to VA code. The VA has what they call Minimum Property Requirements. This is a list of requirements that all homes with VA financing must meet.
The MPRs include:
- The home must be large enough for your family. There must be enough sleeping quarters, room in the kitchen, and living space for everyone.
- The utilities must all be in good working condition and have a little bit of life left on them.
- The roof must be in good condition and have at least a few years left on it.
- The water must be consumable.
- The septic system must be in good working condition.
- There must not be any mold or mildew.
- The basement and attic must be well ventilated.
- There cannot be any lead based paint.
- There should be street access to the home year-round.
- There cannot be any pest damage.
If the home does not meet some or all of these requirements, you’ll need to show how you plan to bring the home up to code.
You must provide the lender with the plans to fix up the home as well as the information and qualifications of the contractor that will do the job.
A VA inspector will be in charge of checking up on the work done and writing off on it when the work is complete. This way the VA knows that the work meets their guidelines and that the contractor didn’t cut any corners that could leave you with a financial mess in the future.
It’s important to note that you cannot use the funds for anything outside of the VA requirements. This isn’t a loan that’s meant to help you add on a room or make cosmetic changes. Instead, it’s a way to help you get the home up to code so that you can live in it safely.
Finding a VA Lender
It may take you a little time to find a willing lender when you want the VA renovation loan. You can likely find numerous VA lenders in your area, but not all of them will allow the renovation loan. If you remember, you aren’t making a down payment on the home. This means that you are putting the lender at risk by borrowing much more than 100% of the home’s current value.
You may have to hop online to find lenders that offer this program. It’s a lucrative program that provides veterans with a safe place to live and the funds to make the home that way. Eventually, the home will appreciate and it will all even out. In the meantime, though, you may have a little negative equity until the home’s value catches up with what it cost you to fix it up.
The VA renovation loan is a great way to buy the home you want even if it doesn’t meet the VA Minimum Property Requirements. Borrowing up to $35,000 is possible to help you make the necessary changes. Make sure you consult with your lender before deciding on any changes, as everything must be approved by the lender.