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Lesson 5.5

Properties You Can Purchase With a VA Loan

 
Samantha Reeves | Real Estate Expert

Acceptable VA Loan Uses

The VA loan program was created to help open the doors of homeownership to more veterans, military members and their families. This program focuses on helping qualified borrowers purchase residential properties they’ll live in as a full-time home.

Let’s take a closer look at some of the acceptable and unacceptable uses of VA loans.

Acceptable uses include:

  • Buying a single-family home. The single-family home is the bread-and-butter of the VA loan program. Single-family homes are a great option for a multitude of buyers, and they’re the most commonly purchased property of VA loan recipients.
  • Buying a condominium unit in a VA-approved development. Condo developments need to be approved by the VA. Your lender and a VA-savvy real estate agent can help you identify suitable properties if you’re searching for condos. With help from your lender, you can ask the VA to approve a development that isn’t on the list. But understand that process can take months to complete.

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  • New construction. The VA also allows for a $0 down loan to build a new home. But it’s difficult to find lenders willing to actually fund the construction of a new home in today’s economic environment. A more common approach is to obtain a construction loan from a builder and then refinance the short-term loan into the VA program.
  • Buying a manufactured home. The VA does allow for manufactured homes, but it’s difficult to find VA lenders willing to finance these properties. Manufactured homes generally decrease in value over time, making them a risky investment for lenders. You’ll typically need to work with a community lender or a mobile home manufacturer.
  • Buying a modular home. You can also use a VA loan to purchase a modular home. These are not the same as a manufactured, or mobile, home. Mobile homes are built to national HUD standards and have a HUD identification tag. Modular homes are typically built on site using prefabricated pieces. Purchasing a new modular home may require the use of a construction loan. Buying an existing modular home is treated the same as any other stick-built home.
  • Buying a multiunit property. Military buyers can purchase up to four one-family residential units in a multiunit property. At least one of those units must be used as the buyer’s primary residence. Duplexes are among the most common.

Unacceptable VA Loan Uses

Unacceptable uses include:

  • Purchasing a home as an investment property. Veterans can’t use VA financing to purchase a home solely as an investment property. VA loans are designed to fund primary residences for service members.
  • Using as a business loan. VA loans can’t be used to purchase a storefront, office space or any other non-residential properties.
  • Buying unimproved land. Veterans can’t use VA loans to purchase bare land or farm ground that does not contain the borrower’s primary home. You also can’t buy land with the intent of someday putting a house on it.
  • Buying abroad. VA loans can only be used for properties in the United States and its territories, which include American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands.

It’s important to know that lenders are free to add their own property restrictions to this list. For example, many VA lenders won’t offer financing for manufactured homes. Others will decline to lend on properties like a working farm or a geodesic dome. Acceptance or denial from one lender does not necessarily translate into acceptance or denial from all lenders.

VA Adaptive Housing Grants

Disabled veterans may have distinct needs when it comes to housing. That can prove a challenge during the house-hunting stage. The VA has two grant programs that can help veterans with certain permanent and total service-connected disabilities build or modify a home to best meet their needs.

One is the Specially Adapted Housing (SAH) grant, and the other is the Special Housing Adaptation (SHA) grant. Renovations and modifications can include accessible bathrooms, bedrooms and kitchens; specially sized doorways; garages and carports; retrofitted faucets and showerheads; ramps and banisters; and a host of other important changes.

The maximum dollar amount available for these grants is set by law but can change annually depending on construction costs and other factors. Veterans interested in exploring the SAH and SHA grants can apply online through the VA's eBenefits portal or contact their nearest VA regional office (1-800-827-1000) for more information.