Many veterans who use the VA Home Loan Guarantee Program
to purchase or refinance
their homes want to make home improvements. Even if you are buying a pre-existing home, there may be certain improvements you will want to make right away to save on utility bills or make the house more energy-efficient. When you purchase or refinance a home through the VA Home Loan Guarantee Program the VA is willing to finance the cost of your energy-efficient home improvements into your loan, so that you will have money available to make your home improvements now.
The VA will allow you to finance money for energy-efficient home improvements into your new mortgage loan or refinance mortgage loan as long as the money is used to pay for one of the following home improvements:
- Heat pumps
- Thermal or storm doors and windows
- Energy-efficient furnace purchase or efficiency modifications to your existing furnace, this means that you can purchase a new furnace or convert the one you already have to make it more energy-efficient.
- Water heater insulation
- Clock thermostats
- Solar cooling systems
- Solar heating systems
- Insulation in the home, including insulation in the floors, attic, walls, and doors
- Any other energy-efficient home improvements that you and your lender agree will lower your utility costs and can be included in the loan
The VA offers veterans the choice to finance their energy-efficient home improvements in order to lower their utilities, and, ultimately save them a lot of money. You are allowed to borrow up to $6,000 without a separate appraisal. There are some important facts to keep in mind about the energy-efficient money you can add to your home loan, including:
- If you plan to borrow any amount up to $3,000, the only documentation you need to show your mortgage lender is the receipts from the improvements. Keep in mind that you cannot include your own labor into these figures.
- If you plan to borrow over $3,000, you will have to show your mortgage company that the money you will save in utility bills will offset the additional cost you will be adding to your monthly mortgage payment. This allows the mortgage company to see that you will be making the same or less of a monthly payment when you add up the mortgage and utility bills, because even if the mortgage rate increases, utility costs will decrease, and there will be no additional financial burden to you.
- To determine if you will save enough money on your utility bills to finance the improvements you want, contact your local utility companies; they can give you a professional opinion about how much you will save. Your lender should accept that as proof of your estimated savings.
- If you plan to make the home improvements after you close the loan but are unsure exactly when, your lender will want to set up an escrow account so that you can spend only the amount of money on the improvements that you specified to them.
Be sure to contact your lender to ensure that you qualify for whichever energy-efficient home improvements you plan to make, so they may be financed into your loan. You may be able to make improvements that can save you money now, instead of later.