VA Loan Articles
VA Loans For Home Improvements?Some VA borrowers want to know if there is a VA guaranteed loan for home improvements. A common version of this popular question goes something like this:
"We own our home and do not owe any more mortgage payments. Can we get a loan for home improvements. For example, paint, carpet, and floor repairs, etc.?"
The VA loan program does not specifically offer a standalone "home improvement loan". VA loan rules don't permit money back to the borrower on new purchase loans, so applying for a VA home loan on property you already own would not be allowed.
(VA borrowers are allowed a refund of money paid up front that is later included in the loan amount or other circumstances where a bona fide refund is owed, but no "profit" on a VA loan for new purchases is allowed.)
If a new purchase home loan on property you already own free and clear is out of the question, can a borrower apply for a cash-out refinancing loan with the idea of using the money for home improvements?
For VA cash-out refinancing loans, the rules are clear-the borrower must have a "first lien" or mortgage on the property in order to apply for refinancing. The rules state you can't refinance on a property that has no first loan to refinance.
That said, borrowers who do have first liens are permitted to apply for cash-out VA refinancing loans and use the money back for any purpose "acceptable to the lender" and that could include home improvements.
VA rules for cash-out refinancing are found in Chapter Six of the VA Lender's Handbook:
"A cash-out refinancing loan is a VA-guaranteed loan that refinances any type of lien or liens against the secured property. The liens to be paid off may be current or delinquent, and from any source, such as tax or judgment liens, or VA, FHA, or conventional mortgages. Loan proceeds beyond the amount needed to pay off the lien(s) may be taken as cash by the borrower for any purpose acceptable to the lender. The loan must be secured by a first lien on the property."
So for homeowners who own their property outright, a VA home loan isn't an option--purchasing a new property or a fixer-upper is an alternative to consider instead. Qualified borrowers who do still have a mortgage payment can refinance the loan with VA cash-out refinancing and use the loan proceeds for home improvements or any purpose approved by the lender.