VA-backed loans are made to purchase single-family homes, including manufactured homes and condominium units. Being primary residences, they are governed by certain occupancy requirements set by the VA. If you hold a VA loan and want to refinance under the Interest Rate Reduction Refinance Loan (IRRRL), will you still be bound by these VA loan occupancy requirements? Let’s find out below.
General VA Loan Occupancy Requirements
When you sign up for a VA home purchase loan, you are required to certify that you intend to live in the home. VA Pamphlet 26-7 said that as of the date of certification, you must either (i) live in the property as your home or (ii) intend to move into the property and use it as your home within a reasonable time.
By reasonable time, it means within 60 days after the closing of the loan. You can be exempt from this 60-day rule if:
- You certify that you will personally occupy the property as your home at a specific date post-closing, and
- You provide a particular event in the future that would allow you to move into the home on a specific future date.
Otherwise, the VA expects that you move into the home within 12 months after the loan closed.
Spouses and Dependents
In cases where the borrower can’t personally occupy the property within a reasonable time, his/her spouse and/or dependent children may satisfy this occupancy requirement.
Spouses can fulfill the occupancy requirement in the borrower is on distant employment. However, she or he would have to consult with a Regional Loan Center (RLC) to determine if this “occupancy” is acceptable.
For dependent child/ren, the dependent child’s legal guardian or the borrower’s attorney must make a certification and sign a Report and Certification of Loan Disbursement.
Active Duty and Retirement
Servicemembers who are deployed on a permanent duty station are considered to be in temporary duty status and are able to meet the VA’s occupancy requirement. This is regardless of whether there is a spouse to occupy the home before the borrower’s return from active duty.
A veteran who wants to retire can use a VA purchase loan and satisfy the VA loan occupancy requirements for as long as he/she has a specific date of retirement within 12 months. And that, he/she must have a sufficient income post-retirement.
Delayed and Intermittent Occupancy
Delayed occupancy is permissible if extensive repairs need to be done on the property. Still, the borrower must certify that he will occupy or reoccupy the property once those repairs are completed.
Moreover, a borrower need not maintain a physical presence on a daily basis in the property. But using the property as a seasonal vacation home is not allowed.
How About the IRRRL?
Once you refinance your loan under the IRRRL, you need not comply with the general rule on occupancy. The program, per se, only requires a certification that you have previously lived in the property.
Similarly, the IRRRL just requires your spouse or dependent children to certify that they have previously occupied the property.
For example, you’ve been transferred on an assignment abroad and plan to rent out your home with a VA loan to it. You can still refinance your loan under the IRRRL using your previous occupancy.
Not only does the IRRRL offer homeowners a chance to lower their current rates, it has less stringent rules such as no appraisal, no credit check, and no current occupancy requirement.