Demystifying VA Loan Occupancy Rules: A Simple 2023 Guide

Getting a VA loan can be a great way for veterans and active duty service members to purchase a home. However, the occupancy requirements for these loans can be confusing. This article will break down the key occupancy rules for VA loans in simple terms.

What is a VA Loan?

VA loans are mortgage loans guaranteed by the Department of Veterans Affairs. They allow eligible borrowers to purchase a home without a down payment and often have lower interest rates than conventional loans.

To qualify, you must be an eligible veteran, active duty service member, or qualifying surviving spouse. You also must intend to use the home as your primary residence.

The Primary Residence Requirement

The most important VA loan occupancy rule is that you must intend to use the property as your primary residence, This means you cannot use a VA loan to purchase a vacation home or investment property that you do not plan to live in

When you apply for a VA loan, you will have to sign a statement certifying you plan to occupy the home. After closing, you typically have 60 days to move into the property.

Exceptions to the 60 Day Occupancy Rule

The VA does allow for some flexibility around the 60 day occupancy timeline in certain situations

• Active duty service members – If you are on active duty, you may be eligible for an occupancy exception if you are deployed or cannot personally move into the home within 60 days. You will need to provide a date that you intend to occupy the home. This date can be extended up to 12 months after closing.

• Pending retirement – If you are retiring within 12 months of closing, you may be able to delay occupancy until after your retirement date You will need to provide documentation of your pending retirement

• Property repairs – If repairs or renovations are required before you can move in, you may be eligible for a delay in occupancy until the work is completed.

• Employment situation – In limited cases, exceptions may be made if your employment situation makes it difficult to occupy the home right away. For example, if you have a contract job in a different location.

Spouse and Dependent Occupancy

In some cases, your spouse or dependents can satisfy the occupancy requirement:

• Your spouse can occupy the home while you are away on active duty deployment or unable to personally live in the property.

• A dependent child may occupy the home while their military parent is deployed or on active duty elsewhere. Additional documentation is required in this situation.

• Note that some lenders may not allow dependent occupancy to meet requirements. Always check with your lender.

Occupancy Violations

If you fail to comply with the occupancy requirements, it is considered a violation. The ramifications are determined on a case-by-case basis by the VA.

Potential consequences include:

• Having to pay back the funding fee
• Losing eligibility for future VA loans
• Being required to refinance into a conventional loan

Occupancy violations should always be avoided or addressed proactively with your lender.

Unique Rules for VA Streamline Refinances

For VA Streamline Refinances of existing VA loans, the occupancy rules are a little different.

You only need to certify that you previously occupied the home as your primary residence. You do not have to continue living in the property after the refinance closes.

This allows those who moved away to refinance into a lower rate and payment.

Renting Out a VA Loan Home

Many wonder if they can rent out their VA loan home after living there for a while.

The answer is yes – you can rent out the property after occupying it for at least 12 months without having to refinance. However, be sure to check with your loan servicer before switching to rental status.

Key Takeaways

Here are some key points to remember about VA loan occupancy:

• You must intend to use the home as your primary residence
• Move in within 60 days of closing in most cases
• Exceptions allow for delays in certain situations
• Spouse or dependents can satisfy requirements in some cases
• Violations can lead to serious consequences
• Unique rules apply for streamline refinances
• Renting out after 12 months of occupancy is allowed

Understanding these simple VA occupancy rules is key to successfully buying and keeping your VA loan home. Be sure to discuss your particular situation with a lender specializing in VA loans.