Homeownership is made possible for thousands of veterans and active-duty military service members each year, thanks to VA loans. The loans often offer lower mortgage rates than other home loans and do not require a down payment or mortgage insurance.

In addition to these well-known perks, you may utilize a VA loan to finance the purchase of a home that needs some work or the renovation of the one you already own. Here are four options for a VA loan to improve home.

VA Cash-Out Refinance

If the amount you owe on your mortgage is less than the value of your home, you may be eligible to use a VA cash-out refinancing to access some of the equity in your home. You can use the money you get from the cash-out toward whatever you like, including making improvements to your house. This option also allows you to convert a conventional loan or an FHA loan into a VA-backed mortgage if you already have one of those loans.

VA Renovation Loan

You can purchase or refinance a home and include the cost of improvements into your mortgage when you take out a VA loan for remodeling and repairs. If you go with this choice, you can purchase houses that already fulfill the VA's minimal property standards. You may utilize the money for repairs to bring the home up to the standards required by the VA.

If you currently own a home needing some TLC, it may be worthwhile to consider applying for a VA rehabilitation loan. In most cases, the maximum loan amount obtained via a cash-out refinancing through the VA is limited to the amount the home is now worth. However, the maximum loan amount that may be obtained via a VA rehabilitation cash-out refinancing is based on the home's estimated worth after the repairs have been carried out.

It is important to be aware that lenders can levy a construction fee of up to 1 or 2 percent of the total amount of the VA remodeling loan. The cost is in addition to the price for the loan's origination and the fee for financing via the VA.

VA Loan for Energy Efficiency

You can include the cost of energy efficiency improvements in the VA loan amount for purchasing or refinancing your home. Enhancements such as thermal windows, insulation, and solar heating or cooling systems are acceptable improvements. The quantity of documentation that must be completed is proportional to the project's total cost.

• The VA believes that a decrease in your electricity expenditures would cover the cost of improvements, bringing the total cost down to less than $3,000.
• More than three thousand dollars and up to six thousand dollars: The lender will examine your plans to ensure that the rise in monthly mortgage payments won't be more than the expected decrease in monthly electricity expenditures.
• If the loan amount exceeds $6,000, the lender will conduct a more in-depth review of the application and seek a "VA certificate of commitment."

Supplemental VA Loans

A supplementary loan from the VA provides an additional option for financing home improvements. To be eligible, the mortgage on your home must be held by Veterans Affairs. The supplementary loan may be arranged as a second mortgage, incorporated into a refinancing transaction, or added to the current mortgage. You can use the money toward renovations that would make your home more habitable overall, but not luxury additions such as swimming pools.

A VA-approved appraiser's signature is required on a "statement of fair value" if the purchase price is less than $3,500. If the total cost of the repairs and upgrades is more than $3,500, the lender will want a compliance inspection and a "notice of value" statement.

Home Renovation Loan Alternatives

Restricting yourself from using just VA loans for home improvements is unnecessary. Here are other options available if you want to acquire a home that needs some work or finance the maintenance of your present residence.

• A home equity loan or line of credit, often known as a HELOC, may be taken out against the equity in one's home. If the amount you owe on your main mortgage is more than the value of your home, you may be eligible for a home equity loan or home equity line of credit (HELOC), which allows you to borrow against part of the difference.
• An FHA 203(k) loan. You can purchase a home with an FHA 203(k) loan while simultaneously rolling the expenses of renovations into the mortgage.
• A loan for a standard home improvement project. The Fannie Mae Homestyle loan is comparable to the FHA 203(k) loan; however, the standards for the applicant's credit score are more stringent, and the guidelines on remodeling work are more flexible. The CHOICERenovation loan offered by Freddie Mac allows borrowers to include the cost of home improvements into the mortgage. In addition, the CHOICERenovation loan allows you to fund improvements that make your home more resistant to natural disasters and may provide down payment credits for equity earned through personal labor.