VA Loan Occupancy Rules: Everything You Need to Know

Introduction

Welcome to our comprehensive guide on VA loan occupancy rules. If you’re a veteran or a service member looking to buy a home, the VA loan program can be an excellent option. However, there are specific occupancy requirements that you need to meet to be eligible for a VA loan.

In this article, we’ll cover everything you need to know about VA loan occupancy rules, including the basics of VA loans, eligibility requirements, occupancy rules, and more. We’ve also included a table with all the essential information for your reference and FAQs to help you understand the nuances of the program. Let’s get started!

VA Loan Basics

The VA loan program is a benefit provided to veterans and service members to help them purchase or refinance a home. The program is administered by the Department of Veterans Affairs and is designed to provide favorable terms and conditions to those who have served our country.

There are several benefits of VA loans, including no down payment requirement, no private mortgage insurance, and competitive interest rates. However, to be eligible for a VA loan, you must meet specific requirements, including credit and income guidelines and occupancy rules.

Eligibility Requirements

To be eligible for a VA loan, you must meet specific requirements, including serving at least 90 consecutive days of active duty during wartime or 181 days during peacetime. Reserve and National Guard members must have six years of service, and surviving spouses may also be eligible.

You’ll also need to obtain a Certificate of Eligibility from the VA to demonstrate that you meet the program’s requirements. Your lender can help you obtain this certificate, which will be required during the loan application process.

Occupancy Rules

One of the most critical eligibility requirements for a VA loan is the occupancy rule. To be eligible for a VA loan, you must either be an active-duty service member, a veteran, or a surviving spouse. You must also intend to occupy the property as your primary residence within 60 days of closing the loan.

The occupancy rule is intended to ensure that VA loans are used to support veterans and their families in obtaining stable housing. The rule also helps to prevent fraud and abuse of the program by investors or speculators.

Understanding the VA Loan Funding Fee

When you obtain a VA loan, you’ll be required to pay a funding fee, which is a one-time cost that helps to fund the program. The funding fee varies depending on several factors, including your military service status, loan amount, and down payment amount.

For example, if you’re a first-time borrower and make no down payment, your funding fee will be 2.3% of the loan amount. However, if you’re a subsequent user and make no down payment, your funding fee will be 3.6% of the loan amount. The funding fee can be financed as part of your loan or paid upfront as a closing cost.

How to Calculate Your VA Loan Entitlement

Your VA loan entitlement is the portion of the loan that the VA guarantees to the lender. The entitlement amount varies depending on your military service status and can be calculated using the VA’s formula. The VA loan entitlement is typically 25% of the loan amount up to the conforming loan limit in your area.

For example, if the conforming loan limit in your area is $510,400, your entitlement would be $127,600 (25% of $510,400). You’ll still need to qualify for the loan based on your credit score, income, and other factors.

VA Loan Occupancy Requirements for Spouses

If you’re a surviving spouse of a veteran, you may be eligible for a VA loan. However, to be eligible, you must meet specific requirements, including occupancy requirements. As a surviving spouse, you’ll need to occupy the property as your primary residence within one year of the veteran’s death.

If you’re unable to meet the occupancy requirements, you may still be eligible for a VA loan under certain circumstances. For example, if you’re unable to occupy the property due to employment, you may still be eligible. Speak with your lender for more information.

VA Loan Occupancy Requirements for Active-Duty Service Members

If you’re an active-duty service member, you may be eligible for a VA loan. However, you’ll need to meet specific occupancy requirements. If you’re deployed, you may be able to count your spouse or dependent children’s occupancy toward meeting the requirement.

Speak with your lender to determine your eligibility for a VA loan as an active-duty service member.

VA Loan Occupancy Requirements for National Guard and Reserve Members

If you’re a National Guard or Reserve member, you may be eligible for a VA loan. However, you’ll need to meet specific occupancy requirements. As a National Guard or Reserve member, you’ll need to occupy the property as your primary residence within 60 days of closing the loan.

If you’re called to active duty, you may be able to count your spouse or dependent children’s occupancy toward meeting the requirement. Speak with your lender to determine your eligibility for a VA loan as a National Guard or Reserve member.

VA Loan Occupancy Requirements for Disabled Veterans

If you’re a disabled veteran, you may be eligible for a VA loan. However, you’ll need to meet specific occupancy requirements. As a disabled veteran, you’ll need to occupy the property as your primary residence within 60 days of closing the loan.

If you’re unable to meet the occupancy requirements due to your disability, you may still be eligible for a VA loan under certain circumstances. Speak with your lender for more information.

VA Loan Occupancy Requirements for Refinancing

If you’re refinancing an existing VA loan, you’ll need to meet specific occupancy requirements. You’ll need to certify that you previously occupied or intend to occupy the property as your primary residence. However, you may be able to obtain a VA streamline refinance, which doesn’t require occupancy certification.

VA Loan Occupancy Requirements for Co-Borrowers

If you’re applying for a VA loan with a co-borrower, both of you must meet the occupancy requirements. You’ll both need to occupy the property as your primary residence within 60 days of closing the loan.

VA Loan Occupancy Requirements for Rental Properties

If you’re purchasing a multi-unit property with a VA loan, you may be able to rent out the other units. However, you’ll need to occupy one of the units as your primary residence. The occupancy rule applies to all VA loans, including those used for rental properties.

VA Loan Occupancy Requirements for Flipping Properties

Flipping a property with a VA loan is generally not allowed. To be eligible for a VA loan, you must intend to occupy the property as your primary residence within 60 days of closing the loan. If you’re purchasing a property with the intent to flip it, you’re not meeting the occupancy requirements.

VA Loan Occupancy Requirements for Joint Ownership

If you’re purchasing a property with a co-borrower who won’t be occupying the property, you may still be eligible for a VA loan. However, you’ll need to meet specific requirements, including credit and income guidelines. Speak with your lender to determine your eligibility.

FAQs

What happens if I don’t occupy the property as my primary residence?

If you don’t occupy the property as your primary residence within 60 days of closing the loan, you’ll be in violation of the VA loan occupancy requirements. This can result in the VA denying your loan or requiring you to repay any benefits you received.

Can I use a VA loan to purchase a vacation home?

No, VA loans can only be used to purchase a primary residence. If you’re looking to purchase a vacation home, you’ll need to obtain a conventional loan or pay cash.

Can I use a VA loan to purchase a rental property?

Yes, you can use a VA loan to purchase a multi-unit property and rent out the other units. However, you must occupy one of the units as your primary residence.

Can I use a VA loan to purchase a mobile home?

Yes, you can use a VA loan to purchase a manufactured home that meets specific requirements. The home must be affixed to a permanent foundation and meet minimum square footage requirements.

Can I use a VA loan to purchase a condo?

Yes, you can use a VA loan to purchase a condo that meets specific requirements. The condo must be VA-approved and meet occupancy requirements.

Can I use a VA loan to refinance an existing VA loan?

Yes, you can use a VA loan to refinance an existing VA loan. However, you’ll need to meet specific occupancy requirements and certify that you previously occupied or intend to occupy the property as your primary residence.

Can I use a VA loan to refinance a non-VA loan?

Yes, you can use a VA loan to refinance a non-VA loan. However, you’ll need to meet specific eligibility requirements, including credit and income guidelines.

What is the VA loan funding fee?

The VA loan funding fee is a one-time cost that helps to fund the VA loan program. The fee varies depending on several factors, including your military service status, loan amount, and down payment amount.

Can I finance the VA loan funding fee?

Yes, you can finance the VA loan funding fee as part of your loan or pay it upfront as a closing cost.

What happens if I’m unable to meet the occupancy requirements?

If you’re unable to meet the VA loan occupancy requirements, you may still be eligible for a VA loan under certain circumstances. For example, if you’re unable to occupy the property due to employment, you may still be eligible. Speak with your lender for more information.

Can I obtain a VA loan with bad credit?

The VA doesn’t have a minimum credit score requirement, but most lenders will have their own guidelines. If you have poor credit, you may still be eligible for a VA loan, but you may need to work with a specialized lender.

What is the maximum VA loan amount?

The maximum VA loan amount varies by location and is based on the conforming loan limit set by Fannie Mae and Freddie Mac. For 2021, the maximum VA loan limit is $548,250, but it can be higher in areas with high costs of living.

Can I use a VA loan to purchase a property outside the United States?

No, VA loans can only be used to purchase properties within the United States, its territories, or possessions.

What are the benefits of a VA loan?

VA loans offer several benefits to veterans and service members, including no down payment requirement, no private mortgage insurance, and competitive interest rates.

Conclusion

VA loans can be an excellent option for veterans and service members looking to purchase or refinance a home. However, it’s important to understand the VA loan occupancy rules before applying for a loan. The occupancy rules are designed to ensure that VA loans are used to support veterans and their families in obtaining stable housing and prevent fraud and abuse of the program.

If you’re considering applying for a VA loan, speak with your lender to determine your eligibility and get started on your homebuying journey. Thank you for your service to our country, and we wish you the best of luck in your homebuying process.

Closing Disclaimer

This article is intended for informational purposes only and should not be considered legal or financial advice. Please speak with a qualified professional before making any financial or legal decisions related to a VA loan.