The VA Renovation Loan
*David’s note* My friend helped me with this information. I made some notes for clarification, and turned it into this article with my thoughts! The VA renovation loan is a fairly new product. This loan allows you to purchase a primary residence that requires renovations. You can then wrap the cost of those renovations into the original loan in order to simplify the renovation process!
This loan is like the FHA 203k loan in many ways, but with the option for 100% financing! Compare the two loans here
Please note, this is not an endorsement for the company. I advocate for shopping around. This lender took the time out of his Saturday to meet with me, in order to help me prepare this information for you and that speaks volumes to me!
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VA Renovation Loan Amount:
Maximum 100% LTV/CLTV subject to VA County Loan Limits plus the VA funding fee. Loan amounts up to $1,500,000 are allowed as long as the VA guaranty or a combination of the VA guaranty plus borrower’s down payment and/or equity equal to at least 25% of the lesser of the sales price or the subject property’s reasonable value as documented in the NOV. The maximum guaranty on a VA loan is the lesser of the veterans available entitlement or the maximum potential guaranty amount.
*David’s note*(layman’s terms) – You can loan up to $1.5 Million, but your remaining VA loan eligibility amount plus equity in the building must be at least 25% of the purchase price!
VA Renovation loan Requirements:
-Minimum repair amount is $5,000; no maximum. Structural repairs are permitted.
- Major rehabilitation/remodeling, such as the relocation of a load‐bearing wall;
- New construction (including room additions);
- Repair of structural damage;
- Repairs requiring detailed drawings or architectural exhibits;
- House is uninhabitable at close of escrow
– Repairs must start within 30 days and be completed within six (6) months
– Up to 5 draws; no initial draw is allowed. The Homeowner/Contractor Agreement and Consultant Work Write Up is signed at all parties agreeing to the draw schedule and holdback policy
– Inspection and title update required prior to each draw
– 15% maximum contingency required (determined by Construction Consultant) *David’s note* This will protect you in case of delays and/or unforeseen expenses.
– Must have fee consultant to ensure program compliance:
- Initial review prior to appraisal
- Cost of Repairs/Fee: varies, contact consultant
– CONTRACTORS MUST HAVE A VALID VA BUILDER ID
- Underwriter will condition for Contractor’s license, liability insurance, bonding, compliance history with governing authority
– Self‐help is not permitted
*David’s note* It is important to follow the above guidelines, but these are fairly similar to the FHA 203k loan guidelines. This loan is an extremely powerful tool for your belt, and I highly recommend looking into it when purchasing a live-in flip!
Read my article about financing HERE!
VA renovation loan Repair List:
-Repair/replacement of roofs, flooring, gutters, and downspouts
- Repair/replacement/upgrade of existing HVAC systems, plumbing, and electrical systems
- Repair/replace/add exterior decks, patios, porches (must increase As‐Is Property Value equal to the dollar amount spent on the improvement)
- Minor remodeling, such as kitchens, which does not involve structural repairs
- Painting, exterior, and interior
- Weatherization, including storm windows, doors, insulation, weather stripping, etc.
- Purchase and installation of appliances including free‐standing ranges, refrigerators, washers/dryers, dishwashers, and microwave ovens *David’s note* This is awesome! You can purchase all appliances through this loan in order to minimize cash spent out of pocket!
- Accessibility improvements for persons with disabilities
- Lead‐based paint stabilization or abatement of lead‐based paint hazards
- Basement finishing and remodeling, which does not involve structural repairs
- Basement waterproofing
- Window and door replacements and exterior wall re‐siding
- Pool repairs
*David’s note* The list of applicable repairs is quite extensive. There is no reason to avoid looking into this loan. As with all loans I recommend shopping around in order to get the best rates. Loan Depot was the company that test-piloted this program a few years ago, so they have a lot of practice helping people complete this loan!
If you want my help finding a solid realtor/lender in your area submit a request for information here!