Across the Veterans United Network, we field tons of questions from military buyers and sellers. One of the biggest areas of uncertainty centers on the acceptable uses of a VA loan.
“Can I use a VA loan to build a house?” “Can I buy a mobile home with VA financing?” “Does the VA fund business loans?”
VA loans are guarded by very specific regulations and requirements. Only certain properties are eligible for VA financing, and pursuit of an ineligible property can seriously delay a purchase.
For the best odds of a timely purchase, limit your house hunt to properties that can easily qualify for VA financing. Whether you’re an agent or a buyer, you need to know whether you’re qualified to use a VA loan, and if your property meets the standards for a VA loan.
Acceptable Uses of a VA loan:
The single-family home: the bread-and-butter of the VA loan program.
- Buying a single-family home. The most common use of the VA loan program.
- Buying a townhouse or condo unit in a VA-approved development. Check with the VA to see if your development is on the “approved” list. If your development has not yet been VA-approved, your agent can submit your condo for approval.
- Buying a manufactured (mobile) home and/or lot. The VA does allow funding for manufactured homes. But beware: Lenders are often hesitant to finance these properties.
- Buying a farm residence to be owned and occupied by the veteran as a home. Service members can buy a house on farm acreage, but not bare ground.
- Improving a home’s energy efficiency. VA Energy Efficient Mortgages (EEMs) can be used to improve a home’s energy usage. EEMs must be used in conjunction with a VA purchase or VA refinance loan.
- Buying a multi-family unit. Military buyers can purchase up to four one-family residential units in a VA-approved condo development. At least one of those units must be used as the buyer’s primary residence.
- Refinancing an existing loan (VA or other). Homeowners can refinance any type of loan (VA, conventional or non-conventional) into a VA Refinance Loan.
- New construction. New construction VA loans are possible–yet tricky–to obtain. Not all lenders are willing to issue VA loans for the purposes of building a home. For a review of VA loan guidelines for new construction, check out this post.
Unacceptable Uses of VA Loans:
Unless occupied by the veteran, investment and rental properties are VA loan no-nos.
- 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 or to purchase a storefront or office space. VA loans can’t be used for non-residential properties.
- Buying unimproved land that does not contain the borrower’s primary residence. Veterans can’t use VA loans to purchase bare land or farm ground that does not contain the borrower’s primary home.
- Buying a home outside the U.S. VA loans can only fund properties on U.S. soil.
Keep in mind that lenders are free to add their own property restrictions, as well. Some lenders are extremely strict with their funds, while others are more flexible. Thus, a denial from one lender does not necessarily translate into a denial from all lenders.
Let us know if your desired purchase doesn’t fit neatly into one of these categories, or if you’d like to learn more about lender-specific regulations. You can contact a Veterans United loan specialist at 855-524-7279 or via VeteransUnited.com.
Photos courtesy of Official U.S. Navy Imagery, Clarkston SCAMP, and Charleston’s TheDigitel