If you use your VA home loan benefits to buy a home, you probably think you have to live in the home for a certain amount of time. Many people believe this myth, but it’s not true. The VA doesn’t require that you live in the home for a certain amount of time, but they do have occupancy requirements you must meet in order to comply with the VA rules.
Move in Within 60 Days
First, you must move into the home you buy with a VA loan within 60 days of buying it. If you can’t meet this requirement, you must give plausible reason to the VA. Typically, only the following people get exceptions to delay their move-in date:
- Current military members – The VA understands that current military members have different needs and may be unable to move into the home right away. You must be able to prove when you will move into the home, though.
- Soon-to-be-retired veterans – If you are in the military but will retire within 12 months, the VA may grant you as long as 12 months to move into the home with proper documentation of your impending retirement.
- Buying a home that needs repairs – If the home isn’t livable right away, you may get an exception to the move-in date from the VA to bring them home up to VA code.
After Taking Occupancy
As long as you take occupancy of the home, you will not have to live in it for a certain amount of time. You can sell the house the next month if you needed to, but that wouldn’t make financial sense. The VA allows you to sell the home whenever you need to, should your circumstances change.
The VA also allows veterans to keep their current home and use their remaining VA entitlement to buy another home, in certain situations. If you want to keep your home and buy another one with your VA benefit, you must meet one of the following requirements:
- You outgrew your home – If you bought your home when you were single, but now have a wife and three kids, you may not be comfortable in your home any longer. The VA may allow you a one-time exception to keep your current home if you want to rent it out and use your remaining entitlement to buy another home large enough for your family.
- Your job relocated you – The VA considers a job relocation of 50 miles or more sufficient to require you to move. If you want to keep the home, you may be able to buy a home with your remaining entitlement, should you have any left.
Should You Sell Your VA Home?
The question you should ask yourself is should you sell your VA home? Just because you don’t have to live there for a certain amount of time doesn’t mean that it makes sense to sell it at any time. The value of the home compared to your outstanding mortgage balance will determine if it makes sense to do so.
Talk with a local realtor or appraiser to determine the estimated market value of your home. Then you can decide if it makes sense to sell it. This is especially important if you didn’t make a down payment on your home. If you’ve only owned it for a year or two, you probably won’t have much equity in the home. This could leave you owing money at the closing if you sold your home too soon.
For example, let’s say you bought a home for $200,000. You didn’t make a down payment and you took out a 30-year loan at 5.5%. You’ve owned the home for 12 months, but suddenly you decide you don’t like the area and want to move. Unless the home appreciated tremendously, you would only have around $3,000 in equity if you made the minimum payment on your $200,000 loan. This probably wouldn’t be enough to cover your portion of the closing costs, which means selling your home would cost you money.
Should You Keep the Home and Buy Another?
If you want to keep your home and buy another one, you may have that option, but you need VA entitlement. Every eligible veteran receives enough entitlement to purchase a home for $484,350. If you didn’t use the entire amount of entitlement to purchase your first home, you may be eligible to use the amount that remains to buy another home.
If you don’t have enough entitlement, you will need to make a down payment equal to 25% of the difference between the purchase price and the amount of entitlement you have. For example, if you have $200,000 in entitlement left and want to buy a $250,000 home, you would owe $12,500 for a down payment. If you have the money for the down payment and you have a plan to be able to afford two homes, it could be a good decision, just think carefully about your budget.
The bottom line is that the VA doesn’t require you to live in the home for a certain amount of time, but there are other factors that could keep you in a home. Before you buy a home, it’s important to think of the next three to five years to help you decide if this home is right for you.