VA loans help those who are serving or have served in the military buy a home with no down payment at lower-than-average rates. There are even specialized loans that can help this group of people buy a fixer-upper.
With a VA renovation loan — also known as a VA reno loan or a VA rehab loan — homebuyers can get a mortgage up to 100% of its projected post-renovation value.
This loan is not for cosmetic upgrades like a new farmhouse kitchen or a fresh coat of paint. Instead, it must be used to improve the home’s safety, accessibility and energy efficiency.
Here’s what you need to know about this type of VA loan, including the requirements, usage and best lenders.
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10, 15 or 30 years for fixed-term conventional loans, 30-year VA and FHA loans. Custom mortgages with fixed-rate terms from 8 to 29 years.
620 for conventional, 500 for FHA
0% for VA, 1% for RocketONE+, 3% for conventional, 3.5% for FHA, 10% to 15% for jumbo
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What is a VA renovation loan?
A VA renovation loan is a type of mortgage backed by the U.S. Department of Veterans Affairs that veterans and service members can use to purchase and improve their homes.
Like any VA loan, borrowers must have served in the military or be a qualified spouse to access the mortgage, and the home they use the loan for must be their primary residence. These home loans don’t require a down payment and offerrates lower than those of a typical conventional mortgage.
Plus, there is no mortgage insurance requirement, even for those who put down less than 20%. Instead, there is a one-time funding fee that ranges from 0.50% to 3.3%, depending on how much the borrower puts down and how many VA loans they’ve taken out in the past.
Here’s the difference between a VA renovation loan and a regular VA loan: While a regular VA loan allows you to take up to 100% of the purchase price, a VA renovation loan allows you to take even more than that, up to 100% of the expected purchase price after the renovations are complete.
Of course, these renovations must be assessed and accepted by a VA-approved appraiser. Additionally, in order to get the loan, you must obtain estimates from VA-approved contractors who will complete the work, demonstrating that these improvements will enhance the property’s livability or integrity.
What is required to qualify for a VA rehab loan?
In addition to this stringent appraisal process, there are a few more requirements for the loan.
Military requirements
You must get a certificate of eligibility from the Department of Veterans Affairs.
In order to be eligible, veterans must have served 24 months of continuous active duty in most cases; active service members need to have served at least 90 consecutive active service days in wartime or 181 consecutive active service days in peacetime; National guard members must have served six years in the Selected Service or 90 days of active service and military spouses must have had a spouse who died while serving or because of an injury or illness due to service.
Financial requirements
While there is no down payment requirement, borrowers must show they can repay the loan. Guidelines are set by individual lenders, but generally, borrowers need to show proof of steady income, have a 620 credit score and have a debt-to-income ratio of 41% or less.
What can you use a VA renovation loan for?
Here are some examples of common structural repairs or repairs that improve accessibility or energy efficiency. These are just general examples; VA-specific requirements may differ from what’s on this list. Consult a Department of Housing and Urban Development-approved housing counselor for more specifics.
- A new roof if an existing one is dilapidated
- Structural beam or wall repair
- Repairs to the foundation of the house
- Foundation stabilization
- Drainage repairs
- Plumbing repairs
- Improved insulation or ventilation
- Solar panel installation
- Bathroom updates that improve accessibility for those who are experiencing a disability
VA renovation loans pros and cons
Pros
- You can get up to 100% of the projected value of the home after renovations
- There is no mortgage insurance required
- Rates are lower than with other renovation loans
Cons
- There are stringent approval requirements you have to meet
- You have to show that the improvements will enhance the home’s livability or structure.
- Lenders and contractors backed by the VA can be hard to find. Plus, you can’t make the improvements yourself
- All renovations must be done within 60 to 120 days of receiving the loan
Best VA renovation loan lenders
Not every lender that offers VA loans offers VA renovation loans. Here are some of our favorites.
Veterans United
If you’re looking for a lender with a stellar record of customer service, think about applying with Veterans United. Its entire business is built on helping members of the military own homes and it consistently receives high customer satisfaction ratings: It has an A+ from the Better Business Bureau and has received top grades on J.D. Power’s customer satisfaction surveys for years.
We also love that Veterans United is dedicated to making an impact in the veteran community beyond its business. Its sister charity, Veterans United Foundation, has raised over $50 million to support veterans and military families throughout the country by partnering with organizations such as Operation Homefront, Hire Heroes and Blue Star Families — charities that focus on housing, job and community support for military families.
Veterans United offers VA renovation loans to eligible borrowers throughout the country.
Veterans United
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Types of loans
Conventional, FHA, VA, USDA, jumbo, refinancing, HELOC, home equity loan
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Terms
10-, 15-, 20-, 25- and 30-year fixed-rate
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Minimum credit score
620 for conventional, 500 for FHA
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Minimum down payment
0% for VA loan, 3% for conventional, 3.5% for FHA
CrossCountry Mortgage
CrossCountry is a good option for those who want to close on their loan ASAP. With its FastTrack Credit Approval, you can close in as little as 10 days.
We like that, in addition to speed, it offers a slew of grant programs for first-time homebuyers, such as its CCM Community promise, which provides first-time homebuyers in 15 major cities with $6,500 to put toward a down payment or closing costs.
It lends in all 50 states, Washington, D.C. and Puerto Rico.
CrossCountry Mortgage
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Annual Percentage Rate (APR)
Fixed-rate and adjustable-rate available, apply online for rates.
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Types of loans
Conventional loans, FHA loans, VA loans, USDA loans, Jumbo loans, manufactured home loans
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Terms
-
Credit needed
620 for conventional loans, 500 to 580 for some government-insured loans
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Minimum down payment
PrimeLending
PrimeLending is known for its construction loans, including VA renovation loans.
We also like that PrimeLending is fast to close. With its Close On Time Cash Guarantee, it promises to close on the loan within 21 days of the sale. If it fails to do so, it will pay the seller $5,000. This could give you a leg up in areas of hot competition by assuring the seller that the closing process will likely be speedy, or they will be compensated.
It lends in all 50 states and Washington, D.C.
PrimeLending
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Rates
Fixed-rate and adjustable-rate available, apply online for rates.
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Types of loans
Conventional, jumbo, FHA loan, VA loan, USDA loan, new construction loan, 3D-printed house loan, down payment assistance loans.
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Term
-
Credit needed
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Minimum down payment
0% if moving forward with a USDA loan; 3.5% if moving forward with FHA loan.
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