One hard and fast rule of the VA loan is owner occupancy. The VA Department created the program for veterans to buy a home for themselves. They didn’t create it for investment purposes or even for veterans to buy a second home. The requirements are strict and must be followed. But, there is a way around it. You don’t need to occupy a home when you use the VA IRRRL program.
Original Occupancy Requirements
First, let’s look at the occupancy requirements when you first secure a VA loan. Part of the documents you sign are one that states you will occupy the property. You have 60 days to meet this condition. This is what the VA considers ample time to get situated in your home. What happens if you can’t move in within 2 months? You have a few exceptions that if they apply to you, a longer time is granted.
Retired Veterans Might not Occupy
Retired veterans often receive an exception. This only applies to those who will retire within the next 12 months, though. If you find and buy a home well before then, you might not be able to move in right away. You must make this clear at the onset of the loan, though. The lender not only has to provide an exception to the move-in date, but also to your income. Retiring means a different amount of income. The lender may need to make sure it is enough to cover the new VA loan.
Sometimes it is impossible to continually occupy a home due to employment responsibilities. In this case, you may be able to get an exception. But, you must prove that you don’t have a home anywhere else. A big risk with this exception is that you have a home somewhere else. The lender will look for proof that you live within the community most of the time. They will also need to be 100% certain you don’t own any other homes.
Fixing up a Home
The VA appraisal is known for its tough requirements. The home must pass certain Minimum Property Requirements. Some borrowers can secure an exception with the lender, though. If they prove they can afford to make the changes, they may secure a VA loan. If you can’t move into the home right away, the lender may grant an exception for occupancy. You must have a concrete plan in place, though, in order to qualify.
Occupancy for the VA IRRRL
The good news is the VA IRRRL doesn’t have occupancy requirements. You don’t have to find a way “out” of the rules. You only have to certify that you once occupied the property. It might seem strange that you can refinance with a VA loan with so few restrictions, but it’s possible.
The VA wants to make sure you originally occupied the loan as you agreed to do. After that, you can do what you want. Oftentimes veterans move because they are transferred, yet they don’t want to give up their home. They may plan to move back to the original home. This is a classic example of when a VA IRRRL works. The borrower lowers his mortgage payment. He is then able to afford rent elsewhere until he can move back home.
Of course, this isn’t the only requirement. You don’t need to be active in the military to get around the VA occupancy requirement. There really isn’t one for the VA IRRRL program. The VA focuses more on the fact that they can lower your mortgage payment. Read on to see how you qualify for this simple program.
Qualifying for the VA IRRRL Program
Qualifying for the VA IRRRL program couldn’t be easier. Basically, the VA wants to know that you can afford your payment. If you afforded the higher payment, you should be able to afford the lower once resulting from the refinance. This is the whole point of the VA IRRRL. You must lower your payment. Of course, there are exceptions.
The VA wants a full 12 months of timely payments on your VA loan. If you have one late payment, they may grant an exception. This is how they tell if you will be able to afford the new loan with a lower payment. They also require that you can prove there is a benefit for the loan. Again, this is pretty easy to meet. A lower payment is a benefit. The VA does not specify the amount you must save. In fact, your payment can even increase. If you have an ARM and refinance into a fixed rate, you may have a higher payment. Just try to secure a rate that will keep your payment less than 20% higher than your original loan. If it exceeds 20%, you need to fully verify your income and credit.
The good news is that you don’t need to occupy the property for a VA IRRRL. This means anyone with a VA loan should be able to refinance. You just need a timely payment history. Focus on making your mortgage payments on time throughout the loan. This way you should be able to take advantage of a lower rate when it becomes available.
Keep in mind, some lenders might have overlays. This means additional requirements on top of what the VA requires. If you run across this, you have options. You can either abide by their rules and meet them or find a different lender. Just because one lender has additional rules doesn’t mean another one does. Consider shopping with at least 3 lenders so you can get the best deal and the least amount of overlays.