VA Loan Occupancy Requirements: A Comprehensive Guide

The VA loan program allows eligible veterans and service members to purchase or refinance a home with no down payment and relaxed underwriting standards. But there are occupancy requirements that borrowers must meet to qualify for a VA loan This article provides a comprehensive overview of VA loan occupancy rules and exceptions

What is the VA Occupancy Requirement?

The main occupancy requirement is that the veteran or spouse must certify they intend to personally occupy the home as their primary residence. They don’t have to live in the home full-time, but it can’t be an investment property or vacation home.

For purchase loans, the borrower must certify they intend to move into the home within a reasonable timeframe after closing, usually within 60 days For Interest Rate Reduction Refinancing Loans (IRRRLs or streamline refis), the veteran only needs to certify they previously occupied the home

Why is Occupancy Required for VA Loans?

Occupancy is required because the purpose of the VA home loan program is to help eligible veterans and service members purchase a primary residence. It is not intended to help investors buy rental properties or vacation homes. Requiring occupancy helps ensure the program serves its intended purpose.

Are There Exceptions to the Occupancy Rules?

Yes, there are some exceptions that allow spouses or dependents to satisfy the occupancy requirement:

• Deployed service members: If the veteran is deployed, their spouse can occupy the home instead.

• Distant employment: If a veteran must relocate for work, the spouse can occupy the home instead of the veteran. Approval may be required.

• Dependents: For active duty veterans who cannot personally occupy the home within 60 days, dependents (or their legal guardian) can satisfy occupancy.

For IRRRLs, previous occupancy by a spouse or dependent child is acceptable.

Delayed Occupancy Exceptions

There are exceptions for delayed occupancy if repairs, construction or improvements will prevent the veteran from moving in within 60 days:

• Major renovations or property repairs
• Construction loans
• Simultaneous purchase and renovation loans

In these cases, the veteran must certify intent to move into the home upon completion.

How is Occupancy Certified?

Veterans certify their intent to occupy by signing two key forms:

• VA Form 26-1802a at loan application
• VA Form 26-1820 at closing

Unless there are red flags, lenders can accept these signed certifications at face value as meeting the occupancy rules.

VA Occupancy Rules for Specific Circumstances

Beyond the general guidelines, there are VA occupancy policies for specific situations:

Active Duty Servicemembers

Active duty servicemembers are considered to occupy the home even if deployed temporarily. There is no minimum physical presence required.

Retiring Servicemembers

Veterans planning to retire within 12 months can qualify for a VA loan in the area they intend to retire. They must provide documentation verifying their retirement date.

Intermittent Occupancy

The home must be near the veteran’s regular place of employment. Frequent long distances between work and home may violate occupancy rules unless the veteran has a long history of local residence.

Unmarried Co-Borrowers

When unmarried co-borrowers apply for a VA loan together, both must individually satisfy occupancy requirements.

Non-Veteran Co-Borrowers

For joint loans with a veteran and non-veteran co-borrower, only the veteran needs to meet occupancy rules.

Living Trusts

The veteran or spouse must be on title and occupy the property, even if held in a living trust.

Surviving Spouses

A surviving spouse of a veteran can meet occupancy requirements by previously occupying the home with the now deceased veteran.

Home Improvement Loans

Veterans can get a VA cash-out or regular refinance to fund home improvements while living in the property. Occupancy must be resumed after repairs are complete.

Buying Before Selling Existing Home

It is possible to qualify for a VA purchase loan on a new home before selling the current home. This requires meeting occupancy requirements in both homes through certifications.

What Happens if Occupancy Rules Are Violated?

If a veteran misrepresents their occupancy intent, it is loan origination fraud. The loan would be subject to immediate demand for full repayment.

The veteran’s entitlement may also be impacted, preventing restoration of the used entitlement without a loan assumption. Penalties can include prison time and/or fines.

Key Takeaways

The main points to remember about VA loan occupancy requirements:

• The veteran or spouse must intend to occupy the home as their primary residence
• There are exceptions for spouses, dependents and delayed occupancy
• Occupancy is self-certified on two key VA forms
• Active duty servicemembers always meet occupancy rules
• Violating occupancy rules has serious consequences

Understanding the nuances of VA occupancy guidelines is crucial for borrowers and lenders. This ensures loans are originated properly and veterans receive maximum benefit from their hard-earned home loan eligibility.