VA Mortgage Repairs & Renovation Mortgage Lenders

VA Mortgage Repairs & Renovation Mortgage Lenders
What is a VA Repairs & Renovation Mortgage?

Qualified Veterans can use a VA mortgage and include up to 50,000 into the purchase or refinance rehabilitation of a VA home loan. By using the after-improved value gives you the room you need to make upgrades and repairs for VA mortgage lenders.

VA Repairs & Renovation Eligible Repairs and Upgrades

All alterations and repairs must be permanently affixed to the property (dwelling or
land) and be ordinarily found on similar properties of comparable value in the
community (must have comps).
Project must be complete with final inspection no later than 120 days from note
date (potential weather impact must be considered).
• The maximum renovation amount, including fees and contingency, must not
exceed $50,000. There is no minimum dollar amount for repairs. Repairs should be non-structural, although minor structural repairs are allowed.
 Any work that requires structural engineering reports or architectural specs is not allowed.
 If any structural work is included, building/construction jurisdictional evidence that project
does not require engineer reports or architectural specs must be provided, e.g., local code
pertaining to type of structural repair, permits and/or other written verification from the
jurisdiction (state, city, municipality or county).
 Minor structural repairs must be those that can reasonably be expected to be completed
within the 120-day time frame.
 If structural repairs are included, the contractor’s bid must include a statement addressing
the fact that all structural repairs do not require engineering or architecture reports to
obtain permits or meet local building codes and that such work will be completed within
120 days. 

VA Mortgage Rehabilitation Ineligible Improvements

× Any work that cannot be completed within 120 days of note date.
× Major structural repairs, rehab or improvements such as load bearing walls,
foundation repair or support joists.
× Improvements or changes that were not approved prior to the start of work.
× Materials or work performed prior to the first draw disbursement.
× Any improvement that does not become a permanent part of the subject
property.
× Weather-impacted work that cannot be completed within 120 days.

The VA Repairs & Renovation Eligible Properties: 
The property must be owner-occupied structure that has been completed for at least 1 year.
 Attached/Detached SFRs
 Attached /Detached PUDs
 VA-approved Condos
 2-4 Units

VA Repairs & Renovation Purchase Example: 

VA Mortgage For Purchase/Renovation Costs

• Sales Price                                                                                            $220,000.00
• Labor/Materials                                                                                      30,900.00
• Soft Costs (permits, etc.)                                                                        524.00
• 10% Contingency                                                                                   3,090.00
*Inspection fees (max 3 draws)                                                                450.00
Total                                                                                                          $254,964.00
“As Completed” NOV appraised value                                                     280,000.00
100% of “As Completed” NOV appraised value                                      280,000.00

                                                                                                                 $254,964 < 280,000

Maximum Loan Amount              $254,964.00

Allowable VA Repairs & Renovation Cost

The actual cost of the renovation based on plans, specifications and accepted contractor’s contract stating scope of work, cost of materials and labor, the timeframe for start, and completion of work.
Maximum Renovation Related Fees Allowed:
• Contingency Reserve not to exceed 10-15%
• Inspection fees – 3 inspections total:
 $150.00 per interim inspection (maximum 2 inspections)
 Final inspection fee per VA Appraisal Fee Schedule based on property location
• Title update fee: $200 flat fee
• Permit fees: as required for permits • Fees not listed above are ineligible to be included in the acquisition cost or to be financed

VA Renovation Mortgage Timing and Occupancy

Timing is crucial. Renovation loans must be prioritized in post-closing to allow quick
purchase and construction to begin on time (45 days for purchase).
 Construction must BEGIN within 30 days of closing.
 All rehabilitation must be completed within 4 months of closing.
 The borrower cannot be displaced from the property (for more than 15 days). Examples of
work that may cause the borrower(s) to be displaced:
 Properties that will not have running water – plumbing repairs that would require the
water to be shut off for long periods of time
No electricity – electrical repairs that would require the electricity to be shut off for long
periods of time
 Missing roof
No heat source

VA Repair Purchase Renovation Contacts Tips

  • Purchase contacts should give the buyer Permit accessibility to the property for contractors, inspectors,
    architects/engineers, and appraisers to provide estimates.
  • Make sure power/water, utilities are on at the time of appraisal inspection to
    avoid increased contingencies. Contingencies will be raised from 10% to
    15% if power and water are turned off.

The VA Renovation Mortgage Terms 
Loan Term Product Name Product Code
15-YR VA Renovation 15 Year Fixed VA150A
20-YR VA Renovation 20 Year Fixed VA200A
25-YR VA Renovation 25 Year Fixed VA250A
30-YR VA Renovation 30 Year Fixed VA300A
30-YR VA Renovation 5/1 Treasury ARM VA51TA
30-YR VA Renovation Jumbo 30 Yr Fixed VAJUMBO30A

VA Mortgage Repairs and Renovation Mortgage Transactions
 Purchase
 Refinance (NON-IRRRL)
 Purchase: To acquire and rehabilitate an existing structure that has been completed for at least 1 year. The initial
certificate of occupancy must have been issued over 12 months ago.
Refinance:
 To rehabilitate an existing structure that has been completed for at least 1 year and to refinance the outstanding
indebtedness.
 Cash-out to the borrower at closing is not allowed.
o Incidental cash-out at closing not to exceed the lesser of 1% of the loan amount or $2,000 is allowed.
o At the completion of renovation, any unused contingency reserve may be returned to the borrower or
applied to the principal balance at the borrower’s discretion.
Seasoning:
The note date of the refinance loan must be on or after the later of:
 The date that is 210 days after the date on which the first monthly payment was made on the mortgage being
refinanced, and
 The date on which six (6) full monthly payments have been made on the mortgage being refinanced.
Properties Listed for Sale:
VA Mortgage Refinances on properties that are listed for sale are not permitted. In all circumstances, the listing agreement must be canceled prior to the VA mortgage repairs or rehabilitation mortgage application date

What are the Key Advantages to The VA Repairs & Renovation Mortgage?

• Both purchases and refinances allow borrowers to borrow up to 100% of the “after improved” value.
• Up to $50,000 in additional financing toward renovation costs is included in the VA mortgage financing.
• Allows luxury improvements (pools, outdoor living).
• Like typical VA loans, after the loan closes it will be purchased by VA repair and renovation mortgage lenders. The
renovation portion of the loan will begin after the loan is purchased and be serviced by
VA repair and renovation mortgage lenders.
• Our seasoned Renovation team are experts in this field and know the “ins
and outs” of renovation mortgage loans.

What is a VA Mortgage Repairs & Renovation Mortgage Loan?

• The VA Renovation loan, valid for purchases or refinances, allows VA-qualified borrowers to easily fund the cost of a purchase or refinance and include the costs of renovations, up to $50,000, into a single loan.
Maybe a more affordable option compared to adding a second mortgage or HELOC.
• Both Purchases and Refinances allow borrowers to borrow up to 100% of the “after improved” value.

How to figure out VA mortgage lenders renovation loan amount? 

  • PURCHASE PRICE: Is the lesser of the sales price plus repairs or the “as completed” NOV appraised value.
  • REFINANCE 100% of “as completed” NOV appraised value.
  • The VA BAS LOAN AMOUNT CANNOT EXCEED 100% LTV/ CTLV

VA Mortgage Lenders Renovation and Repair Draw Process:

 No more than three draws are allowed.
 Funds will be made available via a two-party check payable to the borrower and contractor.
 VA Repair Mortgage Lenders should release monies within 5 business days of receipt of a properly executed VA RENO DRAW REQUEST.
 Upon completion of a stage of work, the contractor will complete and submit a Draw Request to VA Repair Mortgage Lenders.
 VA Repair Mortgage Lenders will order project inspections for all draw requests.
 In addition to VA Repair Mortgage Lenders ordered inspections, any inspections required by local authorities or to obtain sign off on permits will be ordered by the contractor and copies of such inspections must accompany draw requests.
 A holdback of 10% will be applied to all intermediate draws.
 The title must be cleared before the final draw.
 After the loan is set up in the servicing system the borrower will receive a “Welcome” package that will explain how the disbursement works and will provide them with contact information.

VA Mortgage Repairs Refinance or Purchase Renovation Draw Disbursement Guide

Congratulations on closing your VA Renovation home improvement loan. VA Repair Mortgage Lenders Home Mortgage, Inc. (“VA Repair Mortgage Lenders”) is
dedicated to helping our customers become successful homeowners. We’re committed to providing the tools and
information you need to efficiently draw funds from your VA renovation loan.
This guide is designed to make the draw process as clear and straightforward as possible to successfully complete your
improvement project within four (4) months of your closing. Remember, these are your funds and we are here to help
manage the use of the funds in your repair escrow account to complete the project as planned.
You are responsible to manage your project on site. You should have regular communication with your contractor to
keep them on schedule and on task with your project. You will be required to approve all draw requests so you should be
prepared to confirm the work on the draw request is completed to your satisfaction. The inspector will not judge the
quality of work, but only confirm the work is completed per the project plans and specs and will point out only obvious
technical deficiencies related to building codes or health and safety issues. Being present when the inspector arrives is
recommended.

Ineligible Properties: 

 Commercial properties
 Cooperatives
 Condotels
 Properties listed on the National Historical Register
 Geothermal homes
 Geodesic dome homes
 Manufactured housing or mobile homes
 Mixed Use Properties in commercial zoning
 Timeshares
 Working farms, ranches, orchards
 Homes that have never been completed
 Homes that have been completely demolished, including the foundation
 Homes being moved from one location to another
 Refinance transactions for properties listed for sale on or after the date of the application.

VA Mortgage Lenders Renovation and Repair Definitions

Contingency Fund
10% of the actual repair amount (and up to a 15% maximum) can be financed and will be held in the repair
escrow account. This reserve of funds is for the purpose of covering unplanned repairs that become
necessary due to health or safety issues. No portion of this money may be used for building material
changes or repairs. This contingency fund is always capped at 15%. If utilities are off at the time of
appraisal inspection, a minimum 15% contingency reserve is required. Any unused funds are returned as a
principal reduction and do not affect payment.

Borrower Funded Contingency
Alternatively, the contingency can be funded with the borrower’s own funds and not be financed. The funds
must be provided at escrow from a documented source (not borrowed or financed). If not required for
repairs, the funds would be returned to borrower at completion of the renovation and at final closeout.

Holdback Fund
10% of the total draw request amount will be deducted and held in the repair
escrow account until the entire project is complete. For example, if $1,000 draw
is requested, Plaza Home Mortgage will issue a check for $900. The $100
the difference will remain in the repair escrow account.
All monies held back will be released after all work is complete and Plaza Home
Mortgage has confirmed that the property’s title is clear of any liens.

VA Mortgage Lenders Renovation and Repair Draws Process

No more than 3 draws allowed.
Examples:
1 Draw = final inspection performed by VA appraiser (1004D) or,
2 Draws = 1 interim performed by constructor inspector and 1 final inspection performed
by VA appraiser (1004D) or,
3 Draws = 2 interim performed by construction inspector and 1 final inspection performed
by VA appraiser (1004D)
• Funds will be made available via 2-party check payable to borrower and contractor.
• Plaza to release monies within 5 business days of receipt of a properly executed VA
Renovation Draw Request.
• No draw at closing allowed

VA MORTGAGE LENDERS RENOVATION REHAB FORMS

  • Contractor’s Fully Executed Bid(s) (see Bid Template)
  • Homeowner/Contractor Agreement
  • Maximum Mortgage Worksheet
  • Borrower’s Acknowledgment
  • Per contractor – W-9, License, Bond, History Letter, and Insurance
  • Contractor Profile Report
  • Loan Submission Checklist

VA MORTGAGE LENDERS SERVICING:

  • Lender’s Notice of Work Completion
  • Change Order Request
  • Lien Waiver and Release
  • Loan Draw Request

VA  MORTGAGE LENDERS CLOSING DOC SET:

  • Rehabilitation Loan Agreement
  • Rehabilitation Loan Rider
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