What You Can (and Cannot) Do With Your VA Loan

America owes much to her veterans, who put their lives on the line for their country.

It’s a debt that cannot possibly be repaid.

But it can be appreciated in a tangible way, which is why we, as a nation, created the VA mortgage program.

This is an amazing program that has allowed more than 22 million veterans and active military families to purchase a home since 1944. VA mortgages come with no down payment, no private mortgage insurance and competitive rates. They’ve also made homeownership possible for scores of service members who might otherwise struggle to secure financing.

But even this remarkable program has limitations, beyond the standard caveats and guidelines concerning eligibility, credit and underwriting. Get the ball rolling on your VA loan application today – Veterans United will help you out every step of the way.

VA Loan Uses

The reality is there are simply some things you can and cannot do with a VA loan.

Qualified borrowers can use VA-guaranteed financing to:

  • Buy an existing home, or purchase a townhouse or condominium unit in a project that has been approved by the VA,
  • Purchase a multi-unit property (up to a four-plex), provided you occupy one of the units as your primary residence,
  • Build a home (It can be tough to find VA lenders willing to make true $0 down construction loans; Veterans United doesn’t currently provide construction financing),
  • Refinance your existing VA loan into a lower rate or out of an adjustable-rate mortgage,
  • Refinance a non-VA loan into the VA loan program,
  • Purchase or refinance and include qualified energy efficiency improvements with a VA Energy Efficient Mortgage,
  • Buy a manufactured (mobile) home and/or lot, buy and improve a lot on which to place a manufactured home which you already own and occupy or refinance a manufactured home loan in order to acquire a lot (It can also be difficult to find VA lenders that will loan on manufactured housing; like a lot of VA lenders, this isn’t something we offer),
  • Refinance into a lower interest rate and/or extract cash from equity.

You cannot use VA-guarantied financing to:

  • Purchase investment property
  • Use as a business loan
  • Buy farm land that does not contain a residence the veteran occupies as a home
  • Purchase a home in a foreign country
  • Purchase a second home

These short rundowns aren’t exhaustive, but they do represent the spirit of the program. This is for purchasing primary residences that you’ll live in full time, not for vacation homes or rental properties. Being able to purchase with no down payment is an incredible benefit, and the VA wants to ensure that qualified borrowers are using this program to achieve the dream of homeownership.

Next step: Discover if you’re an eligible borrower.

Why You Can’t Use a VA Loan to Buy Land

VA loans were established to ensure veterans and servicemembers affordably realize the dream of homeownership. That’s why VA loans allow borrowers to purchase land where a home is or will be situated. But you cannot buy land with no immediate plans of construction. What’s more, it can be tough to find a VA lender willing to lend on a construction loan. Instead, many veteran homebuyers looking to build, finance the new construction with a local institution, then refinance the loan on the newly built home into the VA loan program with a VA Cash-Out Refinance Loan.

Why Use a VA Loan

While it may not be for everyone, a VA mortgage remains an amazing opportunity.

About 9 in 10 VA homebuyers purchase with no money down. Despite that flexibility, these loans have had the lowest foreclosure rate of any loan product for nearly all of the last five years. VA lenders are generally looking for at least a 620 credit score, which is well below what you’d typically need for conventional financing (and that’s going to come with a down payment of at least 5 percent).

Best of all, even in these tough economic times when traditional financing has become difficult to secure, VA mortgages are still making homeownership a reality for the men and women to whom America owes so much.

If you’re ready to move forward with the VA home loan or refinance process getting started is easy. Check out your VA Loan eligibility here or speak with an experienced Veterans United loan specialist at 855-870-8845.

Next step: Find out how to prequalify for a VA Loan.

36 responses to “What You Can (and Cannot) Do With Your VA Loan”

  1. Shannon Deasey says:

    I wish the rules were the same for all states. If you live in a community property state, they take into account your spouses credit history and not the vets alone. In a non community state, the vets credit is the sole factor. I don’t feel that is fair. My credit history is good, and I make enough to afford a loan on my own, but I now have to wait two years before I can apply, in order to fix my wife’s credit history. If the loan is going to be in the vets name only, why should the community state be a factor? That should be an issue of the courts in a divorce or something of that nature.

    • Chris Birk says:

      Shannon,

      Living in a community property state can definitely present challenges. I think in your unique case, the problem is that you were on the title on that previous mortgage. I’m sorry to hear that you guys were within that two-year window. If you would be interested, I would love to put you in touch with our Lighthouse Program, which runs a free program for veterans aimed at helping them repair a credit score and get in the best possible position to prequalify. Please let me know if you might be interested in working with one of the home loan consultants over at Lighthouse. No matter what , don’t spend any money trying to boost your wife’s score. There are some simple steps prospective borrowers can take; they just take time and patience to pay off.

  2. Gail says:

    What are the advantages of both husband and wife both being vets

    • Chris Birk says:

      @Gail: Thanks for writing and for your service to our country. You each have VA loan entitlement, so you can approach buying a couple different way. One of the biggest advantages comes if you wanted to purchase another home elsewhere and keep the one you’re living in — if you’re able to buy the first one using just one of your Certificates of Eligibility, the other would have full entitlement on that second purchase. I can explain further if you need — chris@vu.com.

  3. Rosemary says:

    Is New York one of the community property state?

  4. Lorraine says:

    Is it possible to use the VA loan to buy a home that is only 68% complete?

  5. Metoosgirl says:

    Can we use my husband’s VA loan to purchase a home on 13 acres?

    • Chris Birk says:

      Possibly. There’s no acreage limit. It’s more a question of whether there are good recent comparable home sales for the appraisal. You can talk with a Veterans United loan specialist about this property in detail at 888-212-1958.

  6. Chris Birk says:

    Yes, the issue is more about whether there are good recent comparable home sales.

  7. Chris Birk says:

    @James: You can give a Veterans United loan specialist a call at 888-212-1958. We’d need to know more about these types of homes. I’m not sure if they’re classified as real property or personal property, if they’re more an RV than a home, etc. It sounds akin to a traditional manufactured, or mobile, home, which many VA lenders aren’t currently financing. But it’s hard to say without more info.

  8. Chris Birk says:

    @Michelle: Thanks for writing. I’m not sure a barndominium would be considered real property, so it may be difficult to get any type of mortgage for this. A modular structure could work, although given the size of the property you may have issues in terms of finding good recent comparable home sales to support the appraisal. You can talk with a Veterans United loan specialist in more detail at 888-212-1958.

  9. Chris Birk says:

    @Sara: Thanks for writing. You wouldn’t be able to use a VA loan to purchase bare land. There would need to be a home in the immediate mix.

  10. Chris Birk says:

    @jp: Thanks for writing and for your service to our country. Yes, this could be a problem, although it’s not automatically a deal-breaker. You’d want to talk with a lender in more detail. This post has more information: http://www.veteransunited.com/valoans/income-producing-properties/. Hope that helps. Let me know if you need anything else.

  11. Chris Birk says:

    @Michael: Thanks for writing and for your service to our country. Part of it would depend on whether this is classified as real property. If it is, then it could still be problematic for the VA appraisal, as it might be very difficult to find even one good recent comparable home sale. You can talk with a Veterans United loan officer in more detail at 888-212-1958.

  12. Chris Birk says:

    @Jenn: Thanks for writing. The VA doesn’t require appliances unless an appraiser feels the lack of one or more presents a health/safety hazard.

  13. Chris Birk says:

    @Alisha: Thanks for writing. Appliances aren’t required unless the appraiser notes a health or safety issue associated with their absence, but if you have your own it shouldn’t be an issue.

  14. Chris Birk says:

    @Christine: Thanks for writing. Yes, this may be possible. You can talk with a Veterans United loan officer in more detail at 888-212-1958.

  15. Chris Birk says:

    @Anthony: Thanks for writing. I’m not sure what you mean by year limit. Like, how old the home can be, or how long the mortgage term can be, or something else?

  16. kathie says:

    Can I use a VA loan to buy a short sale or foreclose home?

    • Chris Birk says:

      @Kathie: Thanks for writing. Yes, it’s possible. It would depend in part on what kind of shape it’s in and whether any repairs required for the loan to close can be made — not all distressed property owners allow repairs. You can talk with a Veterans United loan officer in more detail at 888-212-1958. Let me know if you need anything else.

  17. Chris Birk says:

    Thanks for writing and for your service to our country. What do you mean by “no value on it?”

  18. Chris Birk says:

    @Bob: Thanks for writing. You would need to be buying the property because you’re living in the home or building a new one. VA allows for a rehab purchase loan, but I don’t know of any lenders making it. So you’d be talking about a construction loan at that point — you couldn’t just purchase a piece of property without a home in the immediate mix, if that makes sense.

  19. Chris Birk says:

    @Daryl: Thanks for writing and for your service to our country. It would depend on your available VA loan entitlement and other factors. Unfortunately, if you’re picking up a part-time job, you’d likely need a two-year history in order to count that income as effective income toward mortgage qualification. You can talk with a Veterans United loan officer in more detail at 888-212-1958.

  20. Chris Birk says:

    @Justin: Thanks for writing. It’s hard to say without more info. Is this going to be considered real property? If it is, I think you might have a tough time finding good recent comparable home sales to support an appraisal. But we can take a closer look — you can talk with a Veterans United loan officer in more detail at 888-212-1958. Let me know if you need anything else.

  21. Chris Birk says:

    @Colter: Are you wanting to use a VA loan to purchase this property?

  22. Chris Birk says:

    No, you wouldn’t be able to purchase bare land.

  23. Chris Birk says:

    @Elwood: Thanks for writing and for your service to our country. Hard to say what an appraiser will or won’t do, but if the barn is getting value in the appraisal, then, yes, it may need to meet property condition requirements. Does the lender know this is a hobby farm? These can be difficult for some lenders to work with.

  24. Brandy says:

    Can we buy a bare lot and purchase a manufactured home to put on it with the VA loan? Also would they cover the cost of getting the land ready for the home? Ya know electric, wells, and what not? Just trying to see if this is a route we want to go down or not…Thanks for any help!

  25. Chris Birk says:

    @Jen: Thanks for writing. You may need to address these issues before the loan can close, and that can be tough with foreclosures, depending on whether the seller will allow repairs. You can talk with a Veterans United loan officer in more detail at 888-212-1958.

  26. Col Spears says:

    Can I purchase land to build a home (not mobile/modular) on. Or can I purchase a home from a contractor/developer that is to be built by them on bare land?

    • Hi Col,
      Thanks for writing. You can’t purchase bare land with a VA loan, even if you have intent to build on it later. But, you could purchase the land and get a temporary construction loan through a local bank and then get your permanent financing with your VA loan. IT would just require coordination on your part to ensure you were preapproved for your VA loan at the appropriate time.
      If you are working with a builder you have the option above, or, if the builder is willing to finance the build, they can do that and you can get your permanent financing with your VA loan.
      Samantha