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VA offers up to $50,000 for home renovations with 0 down, 0 equity
By Jeff Lazerson
What I think: One big challenge for anybody taking out a zero down payment or zero equity VA loan purchase or refinance loan (active duty service members, reserve and national guard members, unmarried surviving spouses and honorably discharged veterans) is finding property fix-up funds.
Equity lines of credit can only help you when you have some substantial property equity. Too many VA borrowers have typically turned to incredibly expensive PACE (property assessed clean energy) funds, high-interest credit cards or bank-type loans. I see this all the time where borrowers are paying a very high cost for credit — heartbreaking and mortifying, for sure.
In a single VA loan, eligible borrowers can finance the owner-occupied property (single family residences, townhouses, condo interiors and two to four units) and receive up to an additional $50,000 for home improvements, renovations and repairs. We’re talking 100 percent of the after-improved property value. For example: Let’s say your purchase price is $600,000 and you have $50,000 of improvements. So long as an independent VA appraiser calculates the after-improved value of your home will be $650,000 or more, you are good to go! That’s as little as a zero down payment on a 30-year fixed rate with the additional $50,000 of improvement financing funds included. Nice!
Now for the fine print:
Typical improvements could be carpet, paint, heating and air conditioning, roof, electrical. You can use the funds for luxury improvements like a pool. Improvements must be affixed to the property.
Major structural engineering requirements like moving an interior wall are not eligible.
Work must start within 30 days of closing escrow on your purchase or refinance. The work must be completed within 120 days. Construction related fees, permits, inspections and contingency reserves are all allowable. You must use a licensed contractor that is subject to VA approval. You cannot do the work yourself.
The total maximum zero down loan amount for one unit in Orange and Los Angeles counties is $679,650. In Riverside and San Bernardino counties, it’s $453,100. Two, three and four units have higher loan limits.
You can go higher than those loan limits but you have to have 25 percent down or 25 percent equity (if refinancing) based on the property value and the max VA loan limit. For example, you have a $1 million after-improved value and your maximum loan limit is $679,650. You have to put down $80,088 or have that as minimum remaining equity (25 percent of $320,350 which is the difference between $1 million and $679,650).
More affordable, all-in-one VA financing and home improvement financing for eligible borrowers should be the first financing consideration for home sweet home.
If you have questions or comments, please contact Jeff Lazerson by clicking here. For more great insight make sure to check out Jeff Lazerson’s Mortgage Grader Radio Show on Sundays at 10 am on AM830 KLAA.
Jeff Lazerson - Mortgage Columnist since 2011