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VA Renovation Loans.
You Served, You Earned It!
The Zero-Down Payment Renovation Mortgage for our Veterans and Current Military Personnel
VA Renovation Loans Program Guidelines
Loan Purpose
- Purchase
- Refinance: Cash out
Credit Profile
- 580 minimum middle credit score for all borrowers on the loan
- 580-659: A minimum of 2 qualifying credit scores are required
- 660+: A minimum of 1 qualifying credit score
- Automated underwriting engine findings, include:
- Desktop Underwriting with Approve/Eligible and Refer/Eligible findings
- Loan Prospector with Risk Class Accept and Risk Class Refer
- No foreclosure or short sale within two years of contract ratification date
- No Chapter 7 bankruptcy discharge within one year of contract ratification date
Amount of Repairs
- Total renovation cost includes required contingency and reinspection fees
- If renovation costs exceed $50,000, either a HUD Consultant Report or a Feasibility Report from PHI Home Inspections will be required
- There is no minimum renovation budget; although repairs exceeding $200,000 will require a second level project review
Cash Out Refinance
- Loan To Value or LTV calculations includes the VA funding fee
- Existing Mortgage Seasoning Requirement:
- The borrower must have made at least six consecutive monthly payments on the loan being refinanced, referred to hereinafter as the Initial Loan, beginning with the payment made on the first payment due date; and
- The first payment due date of the refinance loan occurs no earlier than 210 days after the first payment due date of the Initial Loan.
Construction Time
- No more than nine (9) months from closing
Contingency Escrow Reserve
- 15% of the Contractor proposal
Draws
- Up to 3 draws allowed
- Draw amount will be based on inspections and percentage of completion
Draw and Title Update Costs
- Up to 3 inspections at $200 per inspection
- No draw permitted to start project. Subsequent draw amounts will be based on inspections and percentage of completion
- Title Updates:
- 1 title update at $150
- 1 Final Lien Waiver provided by the General Contractor
General Contractors
- Only 1 General Contractor (“GC”) allowed
- GC must be registered with the VA. See VA Builder Registration for a list of VA registered builders
- GC can’t be related to the borrower(s) or an employee/employer of the borrowers
- GC must be insured, licensed, and bonded
- GC must provide a detailed contractor estimate itemizing all repairs that are to be completed with costs broken down by material and labor and if applicable permit costs
Maximum Loan Amount
- The maximum loan amount is the standard conforming loan limit, which is currently $806,500
- High balance and jumbo loan amounts are not permitted
Funding Fee
- Funding Fee is waived for Veterans receiving VA related disability income and surviving spouses of Veterans who haven’t remarried
- Funding Fee Calculations are as follows:
| Purchase | |||
|---|---|---|---|
| Type of Veteran | Down Payment | % for First Time Use | % for Subsequent Use |
| Active Duty, Reserve, National Guard | None | 2.30% | 3.60% |
| 5% or more but Less than 10% | 1.65% | 1.65% | |
| 10% or more | 1.40% | 1.40% |
Ratios
- As determined by Automated Underwriting System or AUS with DTI ratios up to 65%. Requires a Desktop Underwriter “Approved/Eligible” or Loan Prospector “Accept” findings
- Manual Underwrite acceptable with DTI ratios as determined by VA Guidelines
Property Type
- Owner-occupied 1- or 2-unit properties
- Existing attached and detached single-family residences
- PUD’s (i.e. Townhomes)
- Manufactured Homes
- Log cabin homes provided Appraisal Report lists other comparable log cabin homes that have recently sold in the area
- Condominium units are not permitted
Occupancy
- Owner occupied only
- All borrowers on the loan must have ownership in and occupy the property
- Non-married Partners not permitted on the loan request
- No co-signers permitted
Property Valuation
- The appraisal order can’t be processed without (1) the Builder/Contractor VA ID number and (2) contractor proposal being obtained
- Appraiser to provide an “as-is value” and “after-completed value”
- Value must be up to 100% of the as-is value plus renovation costs
- Final inspection must be completed by a VA Appraiser once property is 100% complete
Documentation
- All loans must be fully documented per Agency Guidelines
- For Self Employed borrowers, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)
Down Payment/Closing Costs
- 0% down payment required
- Seller contribution toward buyers closing costs up to 4% of the purchase price
Terms
- Amortization period: 15, 20, 25, 30-year fixed rate
