What Is a VA Renovation Loan?
A VA renovation loan — sometimes called a VA rehab loan or VA home improvement loan — allows eligible veterans and service members to finance both the purchase of a home and the cost of necessary repairs or improvements through a single VA-guaranteed mortgage. Instead of taking out a separate construction loan or paying out of pocket, the renovation budget is rolled directly into your mortgage.
Like traditional VA purchase loans, VA renovation loans offer $0 down payment, no private mortgage insurance (PMI), and competitive interest rates. The key difference is that the loan is designated for the alteration and repair of the property — making it the VA's answer to the FHA 203(k) loan, but with the superior benefits only available to those who have served.
The renovation loan can also be layered with a VA Energy Efficient Mortgage (EEM), allowing you to add up to $6,000 in qualified energy-saving improvements on top of your renovation scope. Both programs are covered in detail below.
How VA Renovation Loans Work
Find Your Home
Identify a property you want to purchase and renovate. It must be your intended primary residence once work is complete.
Get Contractor Bids
Work with licensed, VA-approved contractors to scope the work and get itemized cost estimates for every planned improvement.
Appraisal & Underwriting
A VA appraiser reviews the property and contractor bids to determine the as-completed value. The lender then underwrites your full loan package.
Close Your Loan
Sign your closing documents. The full loan amount — including renovation funds — is established at closing.
Complete Renovations
All construction must be completed within 120 days of closing. Funds are released in draws as work is completed, with inspections at each milestone.
Move In & Enjoy
Once renovations pass final inspection, your home is ready. One loan, one payment, one beautifully updated home.
Understanding the As-Completed Appraisal
Unlike a standard VA purchase where the appraisal determines the current market value, a renovation loan uses an "as-completed" appraisal. The VA appraiser reviews the property as it currently stands, examines the contractor's itemized bids and scope of work, and then determines what the home's estimated market value will be once all renovations are finished.
The final loan amount is based on the lesser of:
- The total acquisition cost (purchase price + renovation costs + allowable closing costs), or
- The as-completed value determined by the VA appraiser
Example:
If the home's sale price is $300,000 and renovations are budgeted at $50,000, your total acquisition cost is $350,000. If the VA appraiser determines the as-completed value is $370,000, the loan is based on the lesser amount: $350,000. The property must support the value — you cannot borrow more than what the home will be worth after improvements.
VA Renovation Loan Requirements
In addition to meeting standard VA loan eligibility requirements — including a valid Certificate of Eligibility (COE) and typically a minimum 620 credit score — renovation loans have additional requirements:
What Can You Renovate?
VA renovation loans cover a broad range of improvements. In general, the project must become a permanent part of the home and improve its safety, livability, or energy efficiency. Here's what's typically allowed:
Expected Timeline
Pre-Approval & Home Search
Get pre-approved, find your property, and begin working with licensed contractors to scope renovations.
Appraisal & Underwriting
VA appraiser performs as-completed appraisal. Lender underwrites the loan based on contractor bids and appraisal value.
Closing
Sign closing documents. Renovation funds are placed in an escrow account for disbursement as work progresses.
Complete Renovations
All work must be finished within 120 days of closing. Inspections verify work at each draw milestone.
VA Energy Efficient Mortgage (EEM)
A VA Energy Efficient Mortgage (EEM) allows qualified borrowers to finance energy-saving improvements as part of their VA purchase or refinance loan. This program can be used on its own or combined with a VA renovation loan to maximize both home improvements and long-term utility savings. According to the Department of Energy, roughly 42% of household carbon emissions come from home energy use — an EEM helps you reduce both your bills and your footprint.
EEM improvements are available for both home purchases and refinances, including VA streamline (IRRRL) refinances. Borrowers typically have up to six months after closing to complete the energy-efficient improvements, though small fixes can sometimes be completed before closing.
EEM Cost Tiers & Requirements
Up to $3,000
The easiest tier to qualify for. You generally only need to provide a copy of a contractor bid or quote, itemizing the costs and manufacturer information for each product to be installed.
Most straightforward approval process.
$3,001 – $6,000
In addition to the contractor bid from Tier 1, you must obtain an energy audit and/or documentation showing a year's worth of utility cost averages for the home. These are reviewed to verify the proposed improvements will meaningfully reduce energy consumption.
Must demonstrate cost savings to borrower.
With IRRRL Refinance
If your EEM improvements cause the new monthly payment (PITI) to be 20% or more above your current payment, the lender must certify you can qualify for the higher payment. Available alongside VA streamline refinances.
Requires payment-shock qualification.
The HERS Index & Energy Audit
A Home Energy Rating System (HERS) report is commonly required for EEM approval, especially for Tier 2 improvements. The HERS index scores a home's energy efficiency on a scale of 0 to 150 — the lower the score, the more efficient the home. A score of 100 represents a standard new home, while 130 is considered typical for an existing home.
The HERS report examines the building enclosure (walls, ceiling, roof, foundation), leakage testing, insulation levels, appliance and lighting performance, HVAC efficiencies, and ventilation systems. This report documents the expected energy savings your improvements will generate — a critical step in proving the upgrades will actually save you money over time.
Eligible EEM Improvements
- Solar water heaters or solar panels
- Furnace efficiency modifications
- Weatherproofing (caulking, weather stripping)
- Attic, wall, and ceiling insulation
- Storm doors and storm windows
- Vapor barriers in crawl spaces
- Programmable/clock thermostats
- Insulating existing water heaters
Not Eligible for EEM
EEM improvements must be permanent to the property. The following typically do not qualify:
- Energy Star-rated appliances (refrigerators, washers, etc.)
- Window air conditioning units
- Vinyl siding
- New roof or shingles (unless part of broader renovation loan)
The Golden Rule of EEM
The VA requires that EEM improvements must save the borrower money. The projected monthly energy savings must be equal to or greater than the additional monthly mortgage cost of financing those improvements. If your energy audit shows that adding $4,000 in insulation would only save $15/month while adding $28/month to your mortgage, it won't qualify. The math has to work in your favor.
Estimate Your Monthly Payment
Use the sliders to see how your purchase price and renovation budget affect your estimated principal and interest payment.
6.5%
Illustrative rate only. Actual rate varies by credit, loan amount, and market conditions.
ESTIMATED MONTHLY PAYMENT
$2,528
per month — Principal & Interest Only
This estimate reflects principal and interest only. Your actual total monthly payment will be higher once property taxes, homeowners insurance, and any HOA fees are added. These additional costs can significantly increase your total monthly obligation.
Important Disclosures
Principal and Interest Only: The estimated monthly payment shown in the calculator above reflects principal and interest (P&I) only, calculated using an illustrative rate of 6.5% APR on a 30-year fixed-rate VA loan. This figure does not include property taxes, homeowners insurance, mortgage insurance, or HOA dues.
Additional Costs Increase Your Monthly Payment: Your actual total monthly housing payment will be higher than the P&I amount shown. Additional recurring costs — including property taxes, homeowners insurance, and any applicable HOA fees — will be added to your monthly payment and can significantly increase your total obligation. For an accurate estimate of your full monthly payment, speak with a loan officer.
Rate Disclosure: The 6.5% interest rate shown is for illustrative estimation purposes only. It is not a commitment to lend, not a rate quote, and not a guarantee of any specific rate or term. Actual interest rates vary based on borrower creditworthiness, loan-to-value ratio, loan amount, property type, and prevailing market conditions at the time of rate lock.
VA Loan Eligibility: VA renovation loans and Energy Efficient Mortgages are available to eligible veterans, active duty service members, and certain surviving spouses. Borrowers must meet all VA lending requirements, including a valid Certificate of Eligibility (COE). The Department of Veterans Affairs does not make loans — it guarantees loans made by VA-approved lenders.
Renovation Loan Availability: VA renovation and rehab loans are specialized products and not all lenders offer them. Program availability, terms, and requirements vary by lender. Contact a loan officer to determine if this program is right for your situation.
EEM Savings Requirement: Energy Efficient Mortgage improvements must demonstrate that projected monthly energy savings are equal to or greater than the additional monthly mortgage cost. Not all improvement proposals will meet this threshold. An energy audit may be required.
Not a Commitment to Lend: All information, estimates, and examples on this page are provided for informational purposes only and do not constitute a commitment to lend, a loan approval, or a guarantee of specific terms. Programs, rates, terms, and conditions are subject to change without notice. Not all programs are available in all states or for all amounts. Other restrictions and limitations may apply.
Equal Housing Opportunity: NEXA Lending, LLC is an Equal Housing Lender. NMLS# 1660690. Corporate Office: 5559 S Sossaman Rd, Bldg 1 Ste 101, Mesa, AZ 85212. Antonio Acosta — NMLS# 1662255. www.nmlsconsumeraccess.org.