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 855-524-7279.

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