The VA escrow hold-back program is a tool veterans use along with their VA home loan. It assists with VA “required repairs” listed on the VA appraisal for the subject property. In cases where a VA appraiser requires repairs, an escrow hold-back is a great option. A VA Renovation Loan is another option on top of a VA Escrow hold-back.
What is a VA Escrow Hold-back?
In short, VA escrow hold-backs allow veterans to have appraiser required repairs completed after closing. Using the escrow hold-back, a veteran’s lender sets funds aside to cover the cost of required repairs listed on the VA appraisal. Then, the veteran’s lender uses those funds and pays the contractors who complete the repairs after closing.
How VA Escrow Hold-backs Help
Whether on a purchase or refinance, VA escrow hold-backs give veterans options when facing VA appraiser required repairs. Most importantly, escrow hold-backs allow loans to fund prior to fixing VA appraiser required repairs (in applicable cases). Without utilizing a VA escrow hold-back VA requires these repairs be fixed before closing.
FAQ’S: VA Escrow Hold-back
VA escrow-holdbacks allow for up to $5,000 in repairs. See VA Renovation Loan for larger projects
Either the veteran and/or a seller can cover costs over the $5,000 cap out of their pocket or proceeds from the sale. Also, a VA Renovation Loan may be a better option for higher cost repairs.
It may be used on BOTH a purchase and a refinance.
Repairs on a VA escrow hold-back begin after the VA loan funds / closes. This is true for both purchases and refinances.
Repairs must be completed within 30 days from the date the loan funds / closes.
VA Escrow Hold-back Allowed Repairs
The VA escrow hold-back bridges the gap between VA required repairs and closing on your VA home loan. However, not all home repairs qualify for a VA escrow hold-back. In fact, VA sets rigid rules for what repairs are eligible for a hold-back.
Most importantly, eligible escrow hold-back repairs are those listed on a VA appraisal by the VA appraiser. The repairs must violate VA’s minimum property standards. As a result, the escrow hold-back program is unable to address borrower desired or “optional”repairs. In other words, veterans cannot use it to finance a new pool etc…
Common VA Required Repairs
VA appraiser’s list a large variety of required repairs. However listing them all here is impossible. Instead, veterans tend to see a handful of common repairs over and over. For example, the most common repairs making a VA appraiser’s list are:
- Broken air conditioner
- Cracked window
- Exposed wiring
Overall, the VA escrow hold-back program is flexible. It allows VA home-buyers to purchase their home or complete their refinance first. Then, after closing their VA home loan they complete the repairs financed by the VA escrow hold-back.
Other Renovation Loans
In addition to a VA escrow hold-back, other similar programs exist for Conventional, JUMBO, FHA and USDA home loans. In fact, these other options also allow borrowers to renovate their homes in addition to addressing required repairs. In other words, they allow for things like a new swimming pool or new cabinetry to be financed. See the links below to learn more.