Thanks to the backing of the U.S. Department of Veterans Affairs (VA), VA loans appeal to a wide range of would-be homebuyers. However, not everyone can qualify, and those who are eligible can only enjoy the advantages of these loans if they agree to fulfill certain requirements. Occupancy is one of these requirements. A VA loan can only be used to purchase a home that will serve as your primary residence, and the property must be occupied by the borrower according to the rules laid out by the VA. Scroll down to explore the occupancy rules for VA loans.
Exploring the Occupancy Rules for VA Loans
When using a VA Purchase Loan to buy a home or a VA Cash-Out Refinance to refinance an existing loan, you have to meet certain eligibility requirements. For example, you must have sufficient income, satisfactory credit, and a valid Certificate of Eligibility that demonstrates that you have enough entitlement. You also have to certify that you intend to use the home as your primary residence.
While the occupancy rules for VA loans seem simple, they can get complicated quickly. What if you are on active duty elsewhere, face a sudden deployment, or receive Permanent Change of Station (PCS) orders that require you to relocate? What if your ability to occupy the property is delayed by necessary renovations? What if you hope to live in the home after your retirement from the military?
As the VA explains, homebuyers who use a VA loan must certify that they intend to use the property as their primary residence. At the time of certification, they must either be personally occupying the home or intend to move into it within a “reasonable time,” which the VA generally defines as within 60 days of closing.
When Deployment, Active Duty, or Distance Interfere
Serving in the military often requires travel. What if a borrower’s professional responsibilities make it impossible for them to fulfill the occupancy requirement? According to Military.com, a service member who is deployed after purchasing or refinancing a home with a VA loan is considered to be in a temporary duty status, and they are able to meet the occupancy requirement. If the demands of active duty prevent a borrower from personally living in the home that they’ve purchased, their spouse can fulfill the occupancy requirement. Alternately, a dependent child can satisfy the occupancy requirement if their parent or parents are deployed. In this situation, the child’s legal guardian or a lawyer must make the occupancy certification on the child’s behalf.
What if long-distance employment that isn’t military-related prevents a borrower from occupying the home within a reasonable timeframe? In some cases, occupancy by a spouse may still satisfy the requirement, but you would need to check with the VA to be sure.
On the Move with PCS Orders
When you receive PCS orders, relocating may make it impossible to continue living in the home that you purchased with a VA loan. How do you juggle the need to move with the occupancy requirement? You actually have a few different options for PCSing with a VA loan. You can sell the house and start fresh in your new location. Alternately, you can rent out the house. Although VA loans cannot be used to purchase an investment property, you are allowed to later move out of a home purchased with this type of loan and rent it out. Of course, you can also hold onto the property if you wish to and have the financial means to maintain two households.
Renovations and Retirement
Sometimes active renovations make it impossible to occupy a property immediately. According to the VA, this situation warrants an exception to the reasonable time rule. Here, a borrower must simply certify that they intend to occupy the property as soon as the work is completed.
Retirement is another acceptable reason for delaying your occupancy. If you have a specific retirement date that is within a year and wish to purchase a home in your intended retirement location, you can request an extension of up to one year to fulfill the occupancy requirement.
The Exception to the Occupancy Rules
The Interest Rate Reduction Refinance Loan (IRRRL) is an exception to the normal occupancy rules for VA loans. Used to refinance an existing VA loan to secure a lower interest rate, an IRRRL does not require that the borrower use the property as their primary residence. While it can certainly be utilized for owner-occupied properties, it can also be used for properties that the owner no longer lives in. For this type of VA loan, you simply have to certify that you lived in the home previously.
Do you have questions about the occupancy rules for VA loans? Are you wondering if this form of financing would be a good fit for you? Let us help. Contact PrimeLending: Manhattan, Kansas today to arrange a consultation. Every year, we help thousands of veterans and active-duty members of the military buy or refinance their homes through the VA home loan program. With our assistance, you can take advantage of the many benefits of a VA loan while saving money due to our lack of lender fees. We offer 100% financing with competitive interest rates – no down payment or PMI required! To learn more, please give us a call at 785-560-3011 or contact us online. We would be happy to help you explore the types of VA loans available. It’s our turn to serve you!