Does the seller have to pay for any of the buyer's closing costs on a VA transaction?

No: The seller is not required to pay any additional closing costs on a VA loan.

Is a termite inspection always required on a VA loan?

Yes: A termite inspection will be required and is typically paid by the seller, but it can be paid by the VA buyer. If any infestation is found, it must be cured. Merchants can sometimes close without termite clearance in hand - contact us for details.

Does the VA loan take longer than conventional to close?

No: A VA loan can close in 2 weeks in most locales with Merchants Home Lending.

Are VA appraisers tougher than conventional on the property?

No: VA appraisers use the same process as conventional but have more latitude in their assessments since only VA underwriters review their work (not appraisal management companies).

Can a VA buyer waive contingencies on their offer?

Yes: VA buyers can waive both loan and appraisal contingencies, though the VA Amendatory Clause still provides protection against low appraisals.

Can a Non-VA buyer assume a VA loan?

Yes, but the seller's VA benefit remains tied up until the loan is paid off. We generally don't recommend this unless the seller won't need their VA benefit again.

Should I accept a VA offer?

Yes, with zero hesitation. VA loans offer the most predictable outcomes of all loan types.

VA Renovation (Rehab) Loan FAQ

1. What is a VA Renovation (Rehab) Loan?

A VA renovation loan allows eligible borrowers to purchase or refinance a home while financing approved renovation costs in a single mortgage, combining home acquisition and improvement expenses into one streamlined VA loan.

2. How does a VA renovation loan differ from a standard VA home loan?

Unlike a standard VA loan, a VA renovation loan includes funds for repairs or upgrades. The loan is based on the property’s future value after renovations rather than its current condition.

3. Who is eligible for a VA renovation loan?

Eligibility is limited to qualified veterans, active duty service members, and certain surviving spouses who meet VA service requirements and lender underwriting standards for income, credit, and occupancy.

4. Can I use a VA renovation loan to buy a fixer-upper?

Yes, VA renovation loans are designed specifically for fixer-uppers. They allow borrowers to purchase homes needing repairs while financing eligible improvements as part of the mortgage.

5. What types of renovations can be financed with a VA renovation loan?

Eligible renovations include structural repairs, roof replacement, HVAC upgrades, plumbing, electrical work, accessibility improvements, and essential safety upgrades required to meet VA property standards.

6. Do VA renovation loans require a down payment?

Most VA renovation loans do not require a down payment, provided the borrower has full entitlement. This helps reduce upfront costs while still financing necessary home improvements.

7. Do VA renovation loans require private mortgage insurance (PMI)?

No, VA renovation loans do not require private mortgage insurance. This keeps monthly payments lower compared to many renovation loan alternatives that include ongoing insurance costs.

8. How are VA renovation loan amounts calculated?

Loan amounts are based on the lesser of the total acquisition plus renovation costs or the appraised after-renovation value, ensuring the loan remains within VA lending guidelines.

9. Are VA renovation loans available for both purchase and refinance?

Yes, VA renovation loans can be used for purchasing a home or refinancing an existing VA loan to include renovation costs, depending on lender program availability.

10. What are the advantages of using a VA renovation loan instead of a separate home improvement loan?

VA renovation loans combine purchase and renovation financing into one loan, offering lower interest rates, no PMI, simplified payments, and stronger long-term affordability.

11. What credit score do lenders typically require for a VA renovation loan?

While the VA sets no minimum score, most lenders prefer credit scores around 620 or higher due to the added complexity and risk associated with renovation financing.

12. Do I need a Certificate of Eligibility (COE) to qualify for a VA renovation loan?

Yes, a valid Certificate of Eligibility is required to confirm VA loan entitlement and military service eligibility before a VA renovation loan can be approved.

13. Can I renovate the home myself under a VA renovation loan?

Generally, self-performed renovations are not allowed. Most lenders require licensed contractors to complete the work to ensure quality, safety, and compliance with VA guidelines.

14. How long do renovations need to be completed?

Renovations typically must be completed within six months after loan closing. Timelines may vary slightly by lender but must follow VA-approved renovation schedules.

15. Are there limits on how much renovation work can be financed?

Yes, renovation limits are tied to lender policies and VA guidelines. The total loan must align with the projected after-renovation value and reasonable improvement costs.

16. Do I need a licensed contractor for VA renovation work?

Yes, licensed and insured contractors are usually required. This protects borrowers and lenders while ensuring renovations meet local building codes and VA property standards.

17. What kind of appraisal is required for a VA renovation loan?

A VA appraisal is conducted based on the home’s expected condition after renovations are completed, rather than its current state at the time of purchase.

18. How is the “after-renovation value” determined for a VA renovation loan?

The appraiser reviews renovation plans, cost estimates, and market data to calculate the projected value once improvements are completed, which influences loan approval.

19. Can I use a VA renovation loan on my current home or only when buying a new one?

VA renovation loans may be used for refinancing an existing home or purchasing a new property, subject to lender guidelines and borrower eligibility in California.

20. What happens if renovation costs exceed the estimated budget?

If costs exceed estimates, borrowers may need to cover the difference out of pocket. Careful contractor bids and contingency planning are especially important in California renovation projects.