Did you know that you can use a VA home loan to break into Eugene’s hyper-competitive housing market? It’s true. A VA rehab loan makes it possible to buy an affordable fixer-upper to become your dream home. Keep reading for the details on how this type of financing can help you become a homeowner in your favorite Eugene neighborhood.
What Is a VA Rehab Loan?
In a nutshell, a VA home loan combines the cost of buying the house and repairing it into a single mortgage. There are significant benefits to this kind of financing if you qualify for a VA home loan.
A VA rehab loan, also called a renovation loan, differs from traditional VA mortgages in that it allows you to buy a fixer-upper. The ability to purchase a house that isn’t ideal is a massive perk in hot housing markets, such as in Lane County. With medium sales prices in our area nearing $375,000 in April, it’s essential to have access to fixer-upper financing if you want to locate a house in a fabulous neighborhood.
Benefits of a VA Rehab Loan
Fortunately, VA renovation loans come with an array of perks. The benefits can make buying a house in need of repairs a doable prospect. What’s more, by taking advantage of a VA rehab loan, you might be able to gain immediate equity when you make repairs to a fixer-upper in a desirable area in Eugene.
Examples of reasons that you should consider a VA renovation home loan include the following:
- Easy to obtain if you qualify
- It doesn’t require a down payment
- No need to pay for monthly mortgage insurance
- Low mortgage interest rates
Given these perks, it’s easy to see why VA home loans that pay for repairs are a terrific option.
VA Rehab Loan Limits
There are limits related to the use of VA renovation loans. For example, it won’t cover a complete, take-it-down-to-the-studs type of renovation. Thus, you’ll need to ensure that the scope of necessary work fits into what the VA allows before applying for this home loan.
Allowable Repairs
Examples of repairs that you can finance with a rehab loan include:
- Electrical
- Plumbing
- Windows
- HVAC
- Mold remediation
- Roof repairs and replacement
In general, you can use a renovation home loan to make the repairs necessary for the health and integrity of the structure. You can’t use it to make purely aesthetic improvements.
Dollar Limit
A VA rehab loan also limits the cost of repairs covered by your mortgage. With a limit of $50,000, you’ll have to choose the scope of repairs with care.
Don’t worry if the restrictions seem overwhelming. You’ll hire an approved contractor with experience in completing VA rehab loan projects.
VA Rehab Loan Process
Assuming that you qualify, obtaining a VA rehab loan isn’t difficult. You’ll find VA-guaranteed home loans available at many financial institutions, and the fees and requirements vary widely. Here’s the gist of what to expect when you decide to take the step in applying for a VA-backed home loan.
Financial Review
Most financial institutions want to ensure that you have strong credit before granting you a home mortgage. Although there is a lower credit score threshold for VA rehab loans than for many non-VA mortgages, you’ll still want a decent credit rating. Ideally, your credit rating should meet a minimum of 660.
Property Appraisal
Because a VA home loan comes with the United States Department of Veterans Affairs backing, there is a stringent appraisal process. The appraiser carefully examines the property to determine its current market value.
Prepare for Closing Costs
Depending on your lender, you should expect to pay somewhere between three and six percent of the total loan amount in closing costs. The VA loan origination fee, for example, can amount to as much as one percent of the total loan amount. Other expenses that go into your closing costs include:
- Appraisal fee
- Credit report
- Insurance
- Taxes
Keep in mind that closing cost amounts are sometimes negotiable. You’ll often have more leverage if you present a strong credit history in your application.
Additional Advice
Financing your fixer-upper through a VA loan can be a fantastic decision if it fits your needs. Along with checking to make sure that this kind of financing suits your needs, there are other steps to make it easier to buy your dream home.
- Take time to sort through your finances before you meet with a mortgage officer. You’ll need to present a significant amount of money-related information in your loan application, so preparing eases the process.
- It’s also helpful to determine your housing budget before you meet with a real estate agent. Knowing your budget saves you time and disappointment during the house hunt.
- Lenders offer different loan packages. Compare the loan details from multiple lenders in your area before you choose one.
- Interview several VA-approved contractors before hiring one for your renovation project. Here is some sage advice on hiring a contractor.
Last Thoughts
Lastly, a VA rehab loan can be your passport into Eugene’s homeownership. Including the cost of needed repairs into your mortgage can make buying a house an easier prospect.
The home loan officers at Strategic Mortgage Solutions in Eugene know our way through the VA rehab loan process. Contact us today, and we’ll help you decide if a VA home loan is the best option for your upcoming home purchase.
