Unacceptable Uses for Va Loans
A Va-guaranteed home loan is a great way for veterans and active duty military members to finance the following:
Unacceptable Uses for Va Loans
- particular house home
- Va-approved townhome
- Va-approved condo
- New construction
- A home remodel or addition
- Cash-out of equity
- Interest Rate discount Refinance Loan (Streamline)
- Energy-efficient upgrades
But, some purposes are just not suitable for the Va Home Loan Guaranty Program, like:
- Undeveloped land with no plan for construction
- Rental property
- Business/residential asset with more than 25% office space
- Multi-family housing that is not owner-occupied
The Va Home Loan Guaranty Program, which originated in 1944 to help military members finance homes in which they intend to live, is not meant for borrowers who cannot meet the owner-occupancy requirements.
A good example of a restricted Va loan use is the financing of undeveloped land. A military member cannot occupy undeveloped land within the Va-described "reasonable time". However, if a Va borrower purchases land with the intention of putting a mobile home on the site, then the asset may be eligible for Va financing. asset purchased for new construction may also be eligible for a Va mortgage by some lenders. The basic rule for land purchases is that the Va borrower must intend to place a Va-approved home on the lot quickly and live there.
Further restrictions on Va mortgage usage have to do with financing earnings property. The Va guidelines for home loans restrict a borrower from purchasing a home intended for earnings property. At conclusion time, a Va borrower must sign documentation certifying that the home being financed with a Va loan will be owner-occupied as a customary abode within a uncostly time.
Another form of earnings asset may consist of multi-family unit residences. Though it is accepted for Va loans to be used to purchase multi-family dwellings, there is a restriction. Va loans can only be used for multi-family dwellings (up to 4 units) if the Va borrower is occupies one of the units as a customary residence. Once the owner-occupancy rule is met, the other units may be used for rental income. Not all Va-approved lenders allow multi-family Va loan financing.
Renting out units in a multi-family home is just one way to create money out of a home financed with a Va loan. However, properties intended for enterprise use can only be financed with a Va-back home loan if the designated office space does not exceed 25% of the total quadrate footage of the house.
Of course, dissimilar Va-approved lenders may have dissimilar guidelines for Va home loan usage. Added information on the restrictions on Va home loan usage can be obtained by talking with an experienced Va mortgage professional.
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