The VA offers endless resources for veterans and active military members. Some of these resources go unused by military servicemen – active, reserve, or retired. Especially as regular life begins to resume, we tend to forget about the continued support offered by the federal government through the VA.
One of these underutilized offerings are VA home loan. While the home loan sector has plenty of options available with a range of opportunity, the offerings from the VA are arguably unmatched because of its direct relationship with the federal government. As such, current and former military service members are able to access some of the lowest, most flexible rates, payments, and terms on the market.
Veteran Benefits Update
In April 2018, the Veteran Benefits Administration updated their policies and practices with regard to veteran benefits and home loans. This occurred in response to increasing interest from the military population as well as housing market demands.
“The Aging housing stock in the United States has contributed to the increased demand for alteration and repair loans. Due to the condition of this aged housing, homes are often sold as “cash or conventional financing” which does not allow Veterans to use their VA earned benefit. This guidance will allow Lender’s to make VA-guaranteed loans to Veterans who wish to purchase or refinance a home that is in need of alteration and/or repair. The terms alteration, repair, renovation, and improvement are interchangeable for the purposes.”
Veterans Benefits Administration, Circular 26-18-6
More opportunity was then accounted for within the VA guidelines on loan capacity, which can be found in the Circular 26-18-6 publication.
VA Loan Capabilities and Eligibility
A major misconception about VA home loans is that they can only be used for purchasing or refinancing. This, then, limits what military borrowers feel they are allowed to do. VA home loans can do much more, though. Some loans have cash-out options allowing borrowers to pay for outside costs or reinvest in their home. There are also supplementary terms that can be added to traditional VA home loans that provide specific support for borrowers pursuing home improvement actions. These are then known as renovation, or rehabilitation, loans.
Because rehabilitation loans are just an extension of normal VA home loans, they have the same eligibility requirements or qualifications. As a result, former or active military are given easier access to loan opportunities to purchase and improve their properties.
VA Home Loans: Rehabilitation
VA Rehabilitation Loans are typically used when a property is not completely move-in ready. These loan agreements may require more processing, which will tack on additional time and energies before the borrower can begin residing on the property. However, they can also serve to save the borrower money in the long run based on financial investment, renovation costs, and even property value.
Lender Oversight
It is important to remember that the process is different than a traditional renovation experience. The lender initiates and oversees the renovation process on behalf of the borrower. Because the lender is the general authority on the completion of work, they are in charge of supervising the contractor. This ultimately expedites the renovation process as opposed to the lengthier improvement repairs attempted by homeowners themselves. Lenders are also able to ensure that time is not wasted and the work is accomplished in an efficient manner.
Home Renovation Loan Options
As is the case with nearly every loan, there are term and agreement options that need to be carefully discussed and selected by the borrower. Some areas of adjustment that relate specifically to rehabilitation loans are:
- Loan type
- Minimum property requirements (MPR)
- Contractor requirements
- Repair/renovation operations
- Notice of Value (NOV)
Understanding the opportunity and value of these variables will allow every borrower to have a satisfying loan experience. Working with loan professionals that understand industry standards as well as Veteran Affairs and military member needs will provide you with the expertise you need for a smooth transition into your new or renovated home.
