For years, a VA Escrow Holdback loan option has not been available for a VA home loan. Well, that wait has come to a glorious end! Welcome to the era of the VA Renovation home loan.
The VA Escrow Holdback Renovation loan resembles an FHA 203k or HomeStyle home loan. With it, veteran’s can finance repair and renovation costs into their home loan. Furthermore, VA Escrow Holdback Renovation loans are for both purchases and refinances.
VA Escrow Holdback Loan Based on Home’s Future Value
Future value is the backbone of the VA Renovation loan. VA appraiser‘s forecast a home’s value on VA Escrow Holdback Renovation loans. In short, future value equals a homes value after repairs & improvements are completed. However, the appraiser gives a concrete future value long before any renovation work begins.
Hence the name – “future value.” Future value gives veterans access to future equity before they have it. As a result, veterans leverage their future equity to finance repair and improvement costs. For example, let’s assume the following:
- Home is worth $300,000 before improvements
- VA appraiser values home at $400,000 once specific improvements are completed
As a result, this home is valued at $400,000 on a VA Escrow Holdback Renovation loan.
VA Escrow Holdback Loan Rules
- Purchases and refinances allowed
- $1,000,000 maximum loan amount
- 90 days to complete work
- Repair costs up to 25% of future value allowed
- Maximum of 3 contractors
- 0% down – equity required (applies to local conforming loan amounts)
Eligible VA Escrow Holdback Loan Repairs & Improvements
VA Escrow Holdback Renovation loans allow different types of repairs. For example:
- Roof repair
- Insulation & Siding
- Kitchen updates
- Electrica, plumbing & septic
- Repair in-ground pools
- Install or repair driveways
- Termite treatment
- Foundation Repair
Veterans finally have a home loan that helps them renovate their home. Funding renovation costs with a VA Escrow Holdback Renovation loan improves the condition and value of a veteran’s home without the out of pocket expenses associated with a rehab.
By Jeremy House