The VA guarantees loans for veterans. This means they promise to pay the lender back should the veteran default. Because of this, the VA only guarantees primary residence home loans. If you buy a home for anything other than living in it full-time, the VA loan won’t be an option.
Even though this strict rule is in place, though, there are ways around it. Keep reading to learn what the VA requires and how it affects you.
Occupying the Home
If you take out a VA loan, you’ll sign a document at the closing that states that you’ll occupy the property within 60 days. The VA does recognize that this isn’t always possible, so they do grant exceptions. You must get your exception approved, though.
The longest period the VA will allow is usually 12 months. They allow this for active duty members that are on the brink of retirement. They may also grant you an exception if you have extenuating circumstances. Make sure when you petition for the delayed move-in date, that you include as many details as possible so the VA can make an informed decision.
If you are married and still on active duty, your spouse can satisfy the requirement for you. Your spouse must occupy the home full-time in order to fulfill the requirement, though.
The VA Streamline Refinance
The VA streamline refinance, known as the Interest Rate Reduction Refinance Loan, is one of the exceptions. You don’t have to certify that you’ll occupy the property with this loan. In fact, you can even move out of the home and rent it out if you wish to do so.
Here’s how that works.
When you bought your home with a VA loan, you used your entitlement. Let’s say you bought a home for $250,000. You used $250,000 of your entitlement. Most veterans receive entitlement for up to $453,100. This means that you still have $203,100 available in entitlement.
Typically, you can’t use your VA entitlement unless you’ve sold the current home that you used for VA financing and paid off the loan. If you refinance it with the VA IRRRL program, though, you don’t have to do that. You can keep the home and petition the VA for a one-time exception to use your remaining VA entitlement. This means that you can hold two VA loans at once.
The VA will grant this exception if you can prove that you ‘need’ to move. Needing to move can be proven with the following:
- You outgrew your home because your family size grew
- Your job relocated you and the commute is too long
- You are taking care of your elderly parents and your current home isn’t accessible or large enough
The VA will entertain other reasons too, but these are the most common. If the VA feels it’s in your best interest to move, they may grant the exception. This means that you can buy another home using your remaining $203,100 in entitlement. If you purchase a home for $203,100 or less, you won’t need to make a down payment.
You will sign documents stating that you will occupy this residence as your primary residence since you are using your VA benefit. If you decide to move from this home, you won’t be able to reuse any of your VA entitlement unless you pay the loan off in full and sell the home. The VA exception is a one-time deal.
The VA loan occupancy requirements are strict, but as you can see, there are ways around it. Talk with your lender about your situation. You may be eligible for a VA loan despite your unique occupancy concerns.