An Overview of Property Types Eligible for VA Loans

Some property types are best for VA Loans

Working with military buyers? Make sure you know what properties are eligible for VA loans.

Apartments, condos, manufactured homes, co-ops, single-family homes — modern real estate has come a long way since the days of the one-room shack.

The current market offers a wide variety of homes to satisfy any buyer’s desires. But VA loan buyers will need to focus on certain types of properties to win final loan approval.

Knowing how VA loans work is the first step toward getting the home of your dreams, and your customers will need to know this crucial information. What are the VA loan requirements for veterans, and what properties are eligible? Figuring out these questions is part of the VA loan process — luckily we have the answers.

The single-family home is the bread and butter of the VA loan program, but many other kinds of homes can also garner VA approval. This post will help guide military homebuyers toward winning properties with a closer look at what homes are eligible for VA loans.

Condominiums/townhouses

Condos and townhouses are certainly eligible for VA financing. But the entire condo or townhouse complex must receive VA approval before a buyer can obtain a loan for one particular unit.

With luck, your buyer’s complex will have already gone through the VA’s approval process. Check the VA’s current list of approved complexes or ask a lender to determine approval status.

If the condo is not on the “approved” list, your buyer’s lender can request approval directly from the VA. This can be a complicated process, so make sure your client is working with an experienced VA-approved lender, like our partners at Veterans United Home Loans.

The VA will comb through the condo’s organizational documents, title, parking availability and homeowner’s association policies, which can take some time. Make sure to warn your buyer about the possibility of delays when pursuing a condo that isn’t on the VA’s approved list.

Manufactured homes

Manufactured homes, better known as mobile homes, are eligible for VA financing. But finding a lender willing to fund a manufactured home purchase can be difficult.

Lenders don’t like depreciating properties, so they’re hesitant to take a chance on a manufactured home. If your buyer is able to find an agreeable lender, the manufactured home must meet the following conditions to earn VA approval:

  • Must be properly affixed to a permanent foundation
  • Single-wide homes must be at least 400 square feet
  • Double-wide homes must be at least 700 square feet
  • Homes must have permanent eating, cooking, sleeping and sanitary facilities

Read more: Here’s What You Can (and Cannot) Do with Your VA Loan

Modular homes

Prefabricated or modular homes can also be financed through VA loans. These homes are built in sections at a factory and reassembled on-site by a contractor. Since modular homes are more likely to appreciate than manufactured homes, it’s usually a little easier to find an accommodating lender for these homes.

In order to qualify for a VA loan, a modular home must be attached to a permanent foundation. The home must also have been built according to HUD guidelines or receive certification from the state in which it was constructed.

New construction

Obtaining a VA construction loan is possible, but definitely tricky. Builders, plans and building sites must be VA-approved. Three different inspections are required. Builders must provide at least a one-year warranty on homes that are built. Yikes.

It’s not tough to see why most lenders shy away from VA construction loans. New construction loans involve lots of red tape and numerous complications can develop.

If your buyer can’t locate a lender willing to issue a VA construction loan, consider recommending these two alternatives:

  • Obtain a conventional (non-VA) construction loan. When the home is complete, refinance the property with a VA loan.
  • Find a contractor willing to build a home based on VA loan preapproval status. The buyer waits until the home is complete, then purchases the home with a regular VA loan. Assuming all goes well with the appraisal, the loan moves quickly toward closing.

Vacant land

Vacant land is a no-no for VA financing. You can’t use a VA loan to purchase a plot of land, even if you plan to put a home on it one day. There would need to be a home in the immediate mix.

Co-ops

Co-ops are not currently eligible for VA loans. VA financing for these shared-ownership properties expired in December 2011, and at the time of this writing, has not been renewed.

Read more: Tips for Buying Distressed Properties with a VA Loan

Photo courtesy of ElvertBarnes