VA borrowers are expected to live in the properties they purchase.
Sounds like a novel concept, right? But the issue of occupancy is important, not to mention often confusing, especially for first-time home buyers.
These flexible, government-backed homes can’t be used to purchase investment properties or vacation homes, but the VA loan advantages are staggering. VA loans are for primary residences, so much so that the agency has developed occupancy requirements to ensure homeownership is the ultimate end.
Veterans and active duty personnel who secure a VA loan have to certify that they intend to personally occupy the property as a primary residence. Essentially, home buyers have 60 days, which the agency considers a “reasonable time,” to occupy the home after the loan closes.
Occupancy rules can be especially important for active duty personnel.
But some buyers may find that two months isn’t enough time. The VA does allow homeowners in certain situations to go beyond that 60-day mark, although occupancy at a date beyond one year is generally unacceptable.
The VA’s Exceptions to Occupancy Rules
There are a few scenarios and living situations in which a VA buyer can purchase a home and occupy it after the 60-day mark. Still, the VA typically requires service members set an occupancy date for less than 12 months after closing a loan. In addition, service members need to make clear the specific date occupancy will occur and the specific event that will make occupancy possible.
Here are a few common situations in which an extension might be permissible:
- Retiring service member: If you plan on retiring within 12 months after applying for your VA loan, you might be able to negotiate for a later move-in date. A retiring veteran must include a copy of their application for retirement, and VA lenders will carefully consider if the retiree’s income is sufficient to maintain a home loan.
- Property repairs or improvements: If you’ve made arrangements with your lender to fix or improve a home in order to meet MPRs, the VA allows you to occupy the home after the repairs have been made. However, you must certify your intent to occupy or reoccupy that property upon completion of the repairs or improvements.
- Intermittent Occupancy: The VA allows for intermittent occupancy due to employment, as long as the borrower has a history of continuous residence in the community and there are no indications of a primary residence established elsewhere. However, use of the property as a seasonal vacation home will not satisfy the occupancy requirements.
- Unusual circumstances: If your circumstance doesn’t match one of the above situations, you may submit a description of your particular circumstance to the VA for approval.
While the VA offers these exceptions, lenders also have their own standards that might affect occupancy requirements.
Spouses and Occupancy
The VA allows for a spouse to fulfill the occupancy requirement for an active duty military member who is deployed or who cannot otherwise live at the property within a reasonable time.
There are also some unique situations where the spouse of a veteran can fulfill the requirement if employment issues are making reasonable occupancy difficult.
But both single and married service members can provide what the VA considers “valid intent” to occupy when they’re deployed from their permanent duty station. This provides a degree of breathing room for homeowners who are still actively serving our nation both at home and abroad.
It’s important to note that VA lenders are required to factor in the cost of a couple’s separate living arrangement. That means any rental costs or expenses associated with the separate housing situations can be factored into the overall debt-to-income ratio.
VA Streamline Refinancing and Occupancy
There’s also a unique wrinkle for VA Streamline refinance loans. In these cases, veterans only have to certify that they previously occupied the home. So, for example, a veteran who buys a home with a VA loan and then gets transferred overseas can rent out the home and still refinance that existing mortgage based on prior occupancy.