Are you a veteran or still in service? Do you need a loan to improve your home? If your answer to both questions is yes, you may want to consider a VA loan. VA loans are designed to help former or current US military members and their spouses own real estate or improve their homes. These loans come with very low-interest rates and are usually given with no or low down payments. Also, you won’t be required to have mortgage insurance before obtaining this loan.
In this article, you will be exposed to all you need to know about VA loan options for home improvements.
What Is A VA Loan For Home Improvements
This loan can also be regarded as a VA renovation loan, and it is typically obtained to improve or renovate homes rather than buying one. It is likely to be on your mind that the Veterans Affairs (VA) are responsible for giving out VA loans, but it is far from the reality.
Banks and other money lenders issue these loans but are guaranteed by the federal government via the Veterans Affairs. VA home improvement loans are given to borrowers as a part of a VA mortgage to enable them to improve homes bought in poor condition to livable ones. Additionally, VA home improvement loans can come in handy when refinancing your mortgage, especially if you need to renovate. Below are the VA home improvement loan options that you may consider when improving or buying a home.
VA Cash-Out Refinance
VA cash-out refinance is taking the excess cash with which your home is worth more than you owe on your mortgage. This refinance redefines your current mortgage loan and you get to pay it as agreed in your new loan information.
A VA cash-out refinance can help you change a non-VA loan to a VA loan. What you do with the cash you get through a VA cash-out refinance is not regulated. Many people take it to pay off debt or improve their homes. However, you must note that you are not allowed to obtain more than the worth of your home.
VA Renovation Loan Option
A VA renovation loan enables you to improve your home and roll the cost into your mortgage. This loan option removes your limitations to only the homes that meet the VA’s minimum requirements. You can use the loan to fix up your home to VA’s standards. Unlike VA cash-out refinance, a VA renovation loan is not restricted by the current worth of your home but it is given based on the expected value of your home after renovation. Read more about Take a Travel Loan for your Summer Vacations.
However, you must know that you are not allowed to renovate any part of your home, and you are restricted to some particular areas. Examples of approved home improvements include;
- Roofs and floors renovation
- HVAC replacement or repairs
- Electrical improvement
- Energy-efficiency improvement
- Foundation improvement
You need to understand that the VA renovation loan can be used only to improve the basic things found in a comparable home to yours in your community. Luxuries such as a pool, a gym set-up, etc., are not allowed to be done with this VA loan option.
VA Supplemental Loan Option
To be eligible for a VA supplemental loan, you must operate a VA mortgage when securing your home. This loan option can be put in a refinance, added to an existing loan, or taken as a different loan on its own. It is an ideal loan option if you are already a homeowner and want to add some upgrades to your home. This loan option only allows you to make improvements on the fundamental changes you did with the loan initially or something related. It is forbidden to spend over 30% of the supplemental loan on heating, cooking, washing, or refrigerating appliances.
A supplemental loan is $3,500 or below, you are to provide “a statement of reasonable value” issued by an appraiser. On the other hand, if the loan is above $3,500 requires you to obtain a “notice of value” and schedule an inspection. Furthermore, a supplemental loan is allowed to improve a home that you own and live in currently. However, it is enough to present proof that you will live in such a home upon completion of the renovation.
VA Energy Efficient Loan Option
VA energy-efficient loan allows VA mortgage homeowners to be able to pay for the cost of energy-efficient upgrades done on such homes. Usually, you are allowed to increase your VA loan to a $6,000 limit to fund energy-efficient improvements. Say you want to exceed this limit, the VA must issue you a Certificate of Commitment. In the energy-efficient type of loan option, loans less than $3,000 are approved based on the improvement costs as it is in the bids presented by the homeowner.
A loan between $3,000 and $6,000 requires both the bids and the information on if the increased mortgage loan will be more than the estimated utility cost savings. It is allowed if you want to do the energy-efficient upgrades yourself but the loan will only cover the materials needed. However, it is suggested by the VA that you contact a professional for your home energy audit to know the needed improvements.
Examples of acceptable energy-efficient improvements are solar heating and cooling systems, insulation, heat pumps, storm windows and doors, and furnace efficiency modifications. However, the list is not restricted to the listed improvements.
Now Is The Time To Consider A VA Loan Option
If you have thoroughly read through this article up to this moment, you must now be familiar with what a VA loan is and the options available for home improvements. The good news is that these home improvement loans available to veterans come with mouth-watering features. These features include no requirement for mortgage insurance, no minimum credit score, lower interest rates, low or no down payment, and low closing costs.
Additionally, in cases related to death or disability during service, the VA funding fee may be overlooked. Get your home improved today with a VA home improvement home option.