The VA requires any home that a veteran buys to be in move-in condition. In other words, it’s safe, sanitary, and has enough space for your family. What if you come across a home that needs some TLC before you can move into it?
Luckily, you may be able to use the VA rehab loan. While you can’t do a lot of renovations, the loan doesn’t provide you with up to $35,000. The VA allows lenders to give you these funds to help you fix up a home to meet the VA guidelines. This is one loan, so you only need to make one payment. You’ll get the funds to buy the home as well as fix it up all in one closing.
Unlike other rehab loans, the VA rehab loan is fairly simple to maneuver.
Only Certain Renovations are Allowed
As we mentioned above, you may only make renovations that bring the home up to the VA’s code. You can’t make cosmetic changes or use the funds for major renovations. The VA Minimum Property Requirements include:
- All utilities must be in proper working condition
- The water must be safe to drink and use
- The roof must have at least 3 years of life left on it
- The septic system must be working
- There cannot be mold or mildew in the basement, attic, or crawlspace
- There cannot be any lead-based paint in the home
- There cannot be evidence of pest or termite damage
- You must have year-round access to the home from the street
- The home must fit your family
Getting the Work Done
Once you decide what work you need to have done, you must run the information past the lender. You must also let them know the information of the contractors that will do the work. The contractors must be licensed and insured. You may want to choose a contractor that has done VA renovations before, as they will know how the process works.
The lender will assign a VA inspector to your project. The inspector will make sure the work is done right. The inspector is also the one that signs off on the project, allowing the contractors to get paid. If the inspector notices any cut corners or other issues with the work done, he may not clear the home for funds disbursement.
Trouble With the VA Rehab Loan
The only trouble you may have with the VA rehab loan is finding a willing lender. Just because the VA allows the program doesn’t mean lenders want to take the risk. The VA doesn’t fund the loans or even underwrite the loans. The VA approved lender does everything. Some lenders don’t want to take the risk that is involved when loaning you more money than the home is worth in order to bring it up to code.
If you have trouble finding a lender, you can use a mortgage broker. A mortgage broker has relationships with hundreds of lenders. They will know who you can go to right away to get your VA rehab loan. If you don’t want to use a broker, you can also do your own research online to find a willing VA lender that is approved to write loans in your area.
The VA rehab loan can help you get a loan to buy a home that doesn’t quite meet the VA guidelines. It may take a little more legwork and time to get the home you want, but it is possible with this flexible loan program.Click to See the Latest Mortgage Rates»