What Projects You Can Use Your Va Home Loan For
The VA Loan basics
The VA Home Mortgage Program is administered through the Department of Veteran Affairs to give veterans and current service members alternative options, fitted for their circumstances, when buying a home. When the GI Bill was created in 1944, the VA Home Loan was born. While the VA only guarantees, or insures, the loans, this assurance helps alleviate a lot of risk for the private lenders who fund the program, and thus borrowers are able to get great terms.
What kind of properties can you buy or improve with a VA Loan?
There are a variety of ways borrowers can use their VA Home Loan. You can buy, improve, build, or refinance, your primary residence. In most cases, rental properties are not eligible and vacation residences are never eligible for the program. There are a number of condominium and townhouse communities that can be included in the program and almost all types of residential properties are accepted, even manufactured homes. For refinancing, there are a couple of VA-qualified options as well as options for making energy efficient upgrades.
Some of the usual types of projects used for the VA Loan program are:
- Purchase a permanent family residence
- Purchase a condo in a VA-qualified community
- Purchase a multi-unit property of up to four units, as long as you live in one of them
- Complete upgrades to improve the energy efficiency of a home
- Purchase a lot or a manufactured home
- Refinance a mortgage
How can you refinance with a VA Home Mortgage?
Contact Your Lender To Get Started On Your Va Home Loan Application
As a VA lender since 2011, Capital Bank has over a decade of experience with helping members of our armed forces buy their dream home. Our lenders can answer any of your questions and guide you through the VA loan process. Our own process is transparent and intuitive to provide you with the smoothest path to closing your home and getting the keys!
Example Of When Youd Have More Than One Loan At A Time
Lets consider a hypothetical: Alex received PCS orders and now has to move herself and her family across the county.
She has a VA loan on her current home and plans to buy a second home using a VA loan as well. In the process of moving, Alex has a hard time selling her home. Or maybe she just doesnt want to sell her home and would prefer to hold onto it and rent it out.
In this situation, as long as her credit and finances qualify her for a loan, shed be able to get a VA loan for her new primary residence while retaining her current home. If shes earning rental income on that home, she may also be able to use that income to offset the cost of the mortgage for her current home when she applies for a new, second VA loan.
However, Alex might be limited in how much she can borrow without having to make a down payment on that second VA loan, depending on how much of her entitlement is left.
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Va Loans Can Not Be Used For Investment Properties Or Vacation Homes
The VA Loan is intended for personal use as a primary residence. It is not intended to be used to fund an investment property purchase. So you cant use the VA Loan to buy a home to immediately rent out to someone else. And you cannot use it to buy a vacation home, summer home, beach house, lake house, or second home.
You can, however, use your VA Loan eligibility to purchase a multi-family home up to 4 units in size, provided you intend to live in one of the units. So in a way, you can use the VA Loan to fund a multi-family investment property, as long as you also use it as your primary residence for at least one year.
Using Your Full Entitlement
If youve got your full entitlement to use, great! This indicates that either youre a first-time VA loan user, or youve fully paid off a previous VA loan. This means you have that full $36,000 entitlement amount. Because theres no limit on how many times you can use your VA loan benefit, each time you pay off a VA loan, that $36,000 is restored.
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Do You Have To Pay Back Va Loan
VA loans are available from local lenders
Private banks, credit unions, and mortgage companies do that. The VA provides insurance to lenders. Its officially called the VA guaranty. The VA assures the lender that it will be repaid if the Veteran can no longer make payments.
Can you buy an apartment building with VA loan? The VA loan can be used to purchase up to a 4-unit house so long as it is owner occupied. These homes are typically separated units with each functioning as a separate apartment.
How long do you have to live in a house with a VA loan?
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, homebuyers have 60 days, which the VA considers a reasonable time, to occupy the home after the loan closes.
Can you use a VA loan on an apartment? The VA loan can be used to purchase up to a 4-unit house so long as it is owner occupied. These homes are typically separated units with each functioning as a separate apartment.
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Do Shop Around For The Best Rate
Not all mortgage lenders are created equal, so Birk recommends getting pre-qualified with multiple lenders, which allows the homebuyer to shop for the best interest rate and compare the fee structure for things like title insurance, loan origination, underwriting and other costs.
Be careful about giving information to mortgage aggregation websites, like Lending Tree or Nerd Wallet, unless you want to get inundated with calls. You also might consider asking family and friends who already own a home about their lender and read reviews online.
We hope that people will shop around a little bit, Rouch said. Lenders arent created equal.
It isnt necessary to obtain your Certificate of Eligibility before starting the home-buying process, though some lenders might require it.
If they have any questions on eligibility, they need to work with a lender to gather the documentation that they need and request a COE, Rouch said. They can do that right away, but I would not recommend that they try it alone. Itll make the process a little smoother if they have the lender involved doing it on their behalf, because theyll be able to walk that through.
I Have Bad Credit Can I Still Qualify For A Va Loan
There is no minimum credit score requirement to take out a VA loan. But lenders will need to decide whether you represent “a satisfactory credit risk.” So while your credit score is taken into account, a low score may not automatically disqualify you. Many lenders look at a range of factors to determine your risk level.
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Who Qualifies For A Va Loan
Although lenders set their own requirements for certain aspects of qualification, VA loans have more lenient credit requirements than many other mortgage programs.
Not all who have served in the Armed Forces qualify for a VA loan. You must meet at least one of the following criteria to qualify:
- Youve served 181 days of active service during peacetime.
- Youve served 90 consecutive days of active service during wartime.
- Youve served more than 6 years of service with the National Guard or Reserves or 90 days under Title 32 with at least 30 of those days being consecutive.
Youre the spouse of a service member who lost their life in the line of duty or as the result of a service-connected disability. You generally cannot have remarried, although there are exceptions.
How To Get A Second Va Loan
If you have an existing VA loan, you can still get another in certain cases. You dont need to have full entitlement to qualify for a second loan in this case, youll have remaining entitlement.
There are plenty of situations in which you may need to get a second VA loan. One common situation is when a service member receives orders to a new station. For whatever reason, they choose not to sell their existing homewhich is financed by a VA loanand also want to purchase another property at their new duty station.
Other situations include when youve:
- Paid off the loan but still own the property
- Had a foreclosure and havent paid back the loan
- Refinanced the home with a non-VA loan
When using your remaining entitlement, the amount you can borrow depends on county loan limits. These limits match those set by the Federal Housing Finance Agency and will vary according to the cost of living in each area. The VA will either cover 25% of the loan limit minus the entitlement already used or 25% of the county limit, whichever is less.
This means if youre in a low cost-of-living area and you wish to purchase an expensive home, you may need to front your down payment to meet that 25% guarantee for your lender.
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Va Loan Rules: Who Can Use The Va Loan Benefit
A reader asks,I was honorably discharged from the Navy after serving for 4 years. I was wondering if my mom can use my VA home loan to buy build a new house on her land?
The short answer is no. According to VA loan rules, benefits are intended only for the eligible veteran and a spouse, where applicable. The veteran and spouse must be legally married in order to use the benefit together, otherwise the borrower must apply for loan on his/her own .
Siblings, parents, dependent children and other relatives are not permitted to use the VA loan benefit. This benefit, unlike the Post-9/11 GI Bill, is not transferable. Its understandable that in light of how the GI Bill benefit has changed over the years that people might assume that the same rules could apply to the VA home loan benefit. But this is not the case.
Borrowers are permitted under VA loan rules of the program to apply for a joint loan with a non-veteran borrower. This would require a participating VA lender willing to approve this transaction and the VA loan guaranty would only cover the veterans portion of the loan.
Borrowers may have difficulty finding a lender willing to issue this type of loan depending on housing market conditions and other factors, but should you find a lender who can work with you, both parties would be required to financially qualify for the mortgage loan.
Do you have questions about VA home loans? Ask us in the comments section. All comments are held for moderation.
What Types Of Homes Can I Buy With A Second Va Loan
The number one rule when it comes to VA-acceptable properties is that the home must be your primary residence, not a vacation home.
As we refer to a second home in this article, we mean additional primary residence not vacation home.
If youre in the market for a second VA loan, you must plan to live in your new home full-time, meaning at least six months out of the year.
As long as you meet that criteria, you can use a second VA home loan to purchase several different types of properties:
- Single-family houses
- Manufactured homes
- Multifamily properties with up to four units
You cant buy an investment property with a VA loan, either. But you can purchase a multifamily property as long as youll live in one of the units. You can rent out the other units for extra income.
If you keep your first home after you move to the new house, you can turn the first into a rental property as well.
There are any number of reasons you might need a new house: new orders, a divorce, even relocating during retirement.
A VA loan can help you get into the new house with little to no down payment and no monthly mortgage insurance if you meet the VA loan requirements and have enough remaining entitlement to qualify.
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Va Loans Can Not Be Used For Unimproved Land
The VA does not allow the VA Loan to be used for the purchase of land unless the veteran also plans to immediately build a home on the property.
This will also require pre-approval from the VA, and may include additional paperwork, inspections, and other red tape. The most common situation in which a veteran can use the VA loan to buy land is when it is used in conjunction with a new construction VA loan.
Exemption From Funding Fees
Disabled veterans are exempted from the VA funding fee, so they dont have to pay the VA funding fee during closing. To qualify for the exemption, you must currently receive some form of disability benefits. Your level of disability is irrelevant.
This exemption can save veterans or their surviving spouse thousands of dollars. For example, if you buy a home worth $200,000, you might pay as much as $2,800 $7,200 in VA funding fees when you close. Disabled veterans can avoid this fee.
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I Paid Off My Current Home But My Coe Doesnt Show Full Entitlement What Can I Do
If you bought a home with a VA loan and its paid off in full, your COE may not show full entitlement. Thats because the VA doesnt automatically restore your entitlement when you pay off a VA loan and keep the home. You need to apply for a one-time restoration of entitlement.
To apply, fill out VA Form 26-1880 here.
Although theres no limit to how many times you can use your VA entitlement, you can only apply for a restoration of entitlement to buy a second home once. You also must have paid off the loan in full, which typically happens by refinancing the VA loan into another loan type, such as a conventional mortgage.
Restoring Your Entitlement After Selling
One of the easiest ways to reuse your VA loan is to sell your current home. You can use the proceeds from the sale to pay off your mortgage in full and request that the VA Eligibility Center restores your entitlement. Both your basic and bonus entitlement is reinstated once your paperwork is processed, and youll be ready to buy a new dream home for your family.
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Va Loan Experts Offer Advice For First
Construction workers work on finishing a new home in the community of Lorson Ranch at Colorado Springs, Colo., March 7, 2013. Veterans Affairs employs assessors and appraisers to ensure that each home purchased by Service members is priced correctly.
Buying a home can seem daunting, especially the first time, but owning property remains the greatest driver of generational wealth and eligible veterans are afforded certain benefits to make owning a home easier through the VA Home Loan Program.
Veterans, reservists and National Guard members can purchase a home or refinance an existing loan whether its a VA loan or not with no down payment.
The no-down-payment piece is certainly the signature benefit, said Chris Birk vice president of mortgage insight at Veterans United, a Columbia, Missouri-based mortgage lender that specializes in VA loans. It has been since the benefits inception.
VA home loans are also exempt from private mortgage insurance , which lenders tack on as a monthly fee for conventional loans with a down payment of less than 20%. On average, that saves veterans $30 to $70 per month for every $100,000 of home value.
National Guard and Reserve members may qualify for a VA home loan if they:
- Served at least six years and were honorably discharged or retired
- Served for 90 days or more on active duty, including at least 30 consecutive days
- Were discharged or released from duty for a service-connected disability.
What Is The Interest Rate On A Va Loan
Interest rates on VA loans can be fixed or adjustable.
- With an adjustable-rate mortgage, your interest rate is tied to a financial index or market interest rate, such as the Libor, and it can change periodically. If interest rates rise, your rate can go up and your monthly payments increase.
- With a fixed-rate mortgage, your interest rate and mortgage payment should stay the same for the life of the loan.
Interest rates on VA loans are typically lower than rates on conventional mortgages. But rates and fees vary among lenders, so be sure to shop around.
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