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Buying your first home in today’s market can feel equal parts exciting and discouraging. Move-in-ready homes often come with higher price tags, tight competition, and fewer options. That’s why many buyers start looking at fixer-uppers as a way to get into a home at a lower cost and start building equity over time.
If you’re eligible for a Veterans Affairs (VA) home loan, you might be wondering whether those benefits can be used to purchase a home that needs some work. There’s a common belief that VA loans are only for pristine, move-in-ready properties. Though that is very often the case, there are some nuances.
The key for veteran home buyers is understanding how property condition rules work, what repairs may be required upfront, and what options exist if a home doesn’t qualify as-is. Once you know the guidelines, it becomes much easier to tell which homes are realistic, which may come with extra hurdles, and which could be out of the question.
Can You Buy a Fixer-Upper with a VA Loan?
Yes, it is sometimes possible to buy a fixer-upper with a VA home loan, but not every fixer-upper will qualify right away, or at all.
VA home loans are designed to help eligible veterans, service members, and certain surviving spouses purchase a primary residence that’s safe and livable from day one. So, while a home doesn’t need to be updated, stylish, or completely free of wear and tear, it does need to meet basic standards for safety, structural soundness, and sanitation.
In practical terms, this creates an important distinction:
- Cosmetic issues, like outdated kitchens, worn flooring or older fixtures, aren’t always a problem.
- Health, safety or major structural issues, such as faulty wiring, roof damage or lack of heat, typically need to be addressed before the loan can be finalized.
This is where the VA appraisal comes in. During the appraisal, the appraiser evaluates the home’s value and notes any visible issues that affect livability. It’s not a full home inspection, but it does help determine whether the property meets the VA’s Minimum Property Requirements as-is or if repairs are needed.
For veteran buyers considering a fixer-upper, this doesn’t necessarily mean the door is slammed shut. But it will create some additional obstacles.
VA Minimum Property Requirements (MPRs)
As mentioned above, when using a VA loan, every home must meet what are called Minimum Property Requirements, or MPRs. These aren’t meant to hold homes to a cosmetic or design standard. Instead, they exist to make sure the property is safe to live in and structurally sound at the time of purchase.
What MPRs Are Designed to Do
At a high level, VA property requirements are meant to ensure the home is:
- Safe for occupants
- Structurally sound
- Sanitary and functional for everyday living
If a home meets those basic conditions, cosmetic flaws or outdated features are typically not an issue.
Common MPR Issues That Can Affect Fixer-Uppers
While every property is different, certain issues are more likely to raise red flags during a VA appraisal. Below are some of the more common examples of MPR issues that could be a problem during the VA appraisal process. If issues like these are present, they usually need to be addressed before the loan can be completed, or they must be factored into a renovation VA loan structure.
Safety Concerns:
- Exposed or damaged electrical wiring
- Missing handrails or unsafe stairways
- Peeling or chipping paint in older homes where lead-based paint may be present
Structural or Moisture-Related Issues:
- A roof that no longer keeps moisture out
- Foundation damage or signs of ongoing settlement
- Persistent water intrusion, dampness or poor drainage around the home
Basic Livability Requirements:
- A working heating system capable of maintaining a livable temperature
- Reliable access to safe drinking water
- Proper sewage or septic systems that function as intended
Pest or Environmental Issues:
- Evidence of termite damage, wood rot or fungal growth
- Environmental hazards that could affect health or safety
What Usually Doesn’t Trigger VA Repairs
On the other hand, many of the things people associate with fixer-uppers might not prevent a home from qualifying, including:
- Outdated kitchens or bathrooms
- Old flooring or worn carpet
- Cosmetic wall damage or aging fixtures
- Normal wear and tear consistent with the home’s age
These issues may affect how much you want to offer for a home, but if they are primarily cosmetic, they don’t usually violate VA property standards.
What Is a VA Renovation or Rehab Loan?
In some cases, a home has strong potential but needs more than minor updates to meet VA property standards. When that happens, a VA renovation or rehab loan may offer a solution.
Now, VA renovation or rehab loans are not a single standardized VA program and may vary by lender availability and structure. But oftentimes, this type of loan allows certain repairs or improvements to be included as part of the VA loan, rather than requiring the buyer to cover those costs entirely out of pocket.
Instead of evaluating the home only in its current condition, the loan can be structured around the home’s expected condition once approved repairs are completed and verified. Repairs included in this type of loan should focus on making the home safe, functional, and comparable to others in the area.
This can include fixing issues identified during the VA appraisal, addressing problems with roofing, heating, plumbing or electrical systems, or resolving concerns that affect basic livability. Buyers usually need a clear scope of work before closing and must work with licensed contractors, with repair funds released as progress is made.
Although repairs may be completed after closing, they must be finished and inspected before the loan can be fully finalized under VA guidelines.
Alternatives for Financing Repairs
A VA renovation or rehab loan isn’t the only way to handle repairs on a fixer-upper. Depending on the scope of work, timing, and budget, some buyers explore other financing options either before or after purchasing the home.
Renovation Loans
One common approach is using a standard renovation loan outside of the VA program. This type of loan may come with a different structure. For example, a renovation loan could start with a defined construction period, after which the loan is refinanced into a fully amortizing VA loan.
Federal Housing Administration (FHA) 203(k) Loans
Some buyers might also consider FHA 203(k) loans, which are designed specifically for homes that need repairs or renovations. These loans allow certain improvement costs to be included in the mortgage rather than paid entirely out of pocket.
FHA 203(k) loans are often used when a home needs more extensive work, but they come with their own set of requirements. Borrowers need to meet FHA credit and down payment guidelines, and the renovation process can involve additional documentation, inspections, and timelines. Mortgage insurance is also required for the life of the loan, which can affect long-term costs.
Home Equity Line of Credit or Home Equity Loan
Another option some homeowners consider is tapping into home equity. A home equity line of credit (HELOC) allows borrowers to draw funds as needed, which can be helpful for ongoing or phased repairs.
A home equity loan (HELOAN), on the other hand, provides a lump sum upfront. Both options typically require sufficient equity in the home, and they are secured by your home, meaning that defaulting on the loans could cost you your home.
Final Thoughts
Fixer-uppers aren’t completely off-limits for VA buyers, but can create some complexity around property condition rules and repair options. Knowing the difference between cosmetic updates and livability issues, and understanding how repairs can be financed, can help you navigate the process.
Disclaimers: A HELOC is a revolving line of credit secured by your home. Borrowers can draw upon the credit as needed during the Draw Period and are only required to pay interest on the amount borrowed. Closed-end second mortgages, home equity loans (HELOANS), and cash-out refinance loans are not a revolving line of credit like HELOCs, and typically provide a single, lump-sum payment at closing that is repaid with a fixed rate in regular installments over a set term, similar to a traditional mortgage.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.
