Options for Veterans to Renovate a Home in L.A.
A VA renovation loan (or VA rehab loan) can be a helpful option for L.A. homebuyers who are purchasing a property that isn't quite move-in ready.
This loan would allow you to use your mortgage to pay for the home by rolling the property purchase price and renovation costs into one affordable loan.
Learn more about VA renovation loans and find out what alternative home improvement financing are available if you cannot secure a VA renovation loan.
How a VA Renovation Loan Differs from a VA Loan
VA renovation loans come with the same benefits and requirements as a standard VA loan, such as purchasing a home with 0% down, no mortgage insurance, and low-interest rates.
However, there are some additional requirements, like getting quotes from VA-approved contractors and using a VA appraiser to determine the property's value once the work is done.
Who Qualifies For A VA Rehab Loan?
In addition to meeting basic service requirements for a VA loan, you'll also need to meet the lender's credit criteria.
The VA doesn't require a minimum credit score. However, lenders usually have their own standard --typically 620.
You'll also need a reliable source of income and meet their DTI ratio standards.
VA renovation loans are only for repairing or upgrading the safety or livability of the property. Luxury upgrades like a pool aren't allowed.
Improvements typically allowed include:
- Repairing or replacing heating and cooling systems.
- Fixing walkways.
- Making it more accessible for those with disabilities.
- Even replacing old appliances.
Note that VA renovation loans can't be used on significant structural changes to the home, like adding a room or fixing the foundation. The max renovation amount is often capped at $50k but will vary by lender.
Additionally, all work must be completed within 120 days of closing and by a VA-approved contractor.
Pros Of The VA Renovation Loan
Borrow 100% Of The "As-Completed" Value
Most loan amounts are based on the current value of the home. However, with VA renovation loans, loan amounts are based on the property's value after improvements have been completed.
This is called the property's "as-completed" value.
More Home Options
If you struggle to find an affordable move-in-ready home, a VA renovation loan is a practical option since it enables you to purchase a home needing a little TLC plus the funds to make necessary fixes.
Potentially Better Than Other Home Improvement Loans
VA renovation loans are a relatively affordable way to increase the value of a home, thanks to the low rates and no mortgage insurance.
You'll also benefit from having only one monthly mortgage payment.
Cons Of The VA Renovation Loan
These are some reasons you may not want (or be able to get) a VA renovation loan.
Hard To Secure
Many lenders don't offer these loans.
Maximum Repair Limits
You might be unable to secure enough funds to cover the cost of the repairs.
Limited Allowable Improvements
VA renovation loans have many limitations regarding what improvements can be funded with the loan, so it may not be the best fit. For home buyers looking to make significant repairs, it's best to consider some alternatives to a VA renovation loan.
Alternatives to a VA Renovation Loan
VA Cash-Out Refinance Loan
A VA cash-out refinance allows you to tap into the equity to fund a variety of projects, including home improvements.
FHA 203(k) Loan
FHA 203(k) loans are similar to VA renovation loans but are backed by the Federal Housing Administration, not the VA. While not FHA lenders offer 203(k) loans, it's easier to find than a VA Renovation lender.
FHA 203(k) loans require a down payment of at least 3.5% and mortgage insurance.
Home Equity Loan Or Home Equity Line Of Credit
Sometimes called second mortgages, these loans allow you to borrow against your home's equity. With a home equity loan, you'll receive your funds in one lump sum and then pay it back over time. With a home equity line of credit (HELOC), you'll borrow what you need, much like you'd do with a credit card.
Looking for a VA Lender in L.A.? Turn to Rancho Vista Mortgage!
Rancho Vista Mortage is your local VA home loan lender that can help you secure the right financing for your Los Angeles home purchase. Contact us today to get started.
* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.