VA loans

VA Loan Myths and Facts On Occupancy

December 29, 2018

VA Loan Myths and Facts On Occupancy

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We’ve received a great deal of questions lately about VA loan occupancy requirements. There are plenty of myths, rumors and half-truths floating around about the nature of VA loans and the occupancy requirement.

What do VA loan rules actually say about the law on occupancy and what does a future VA borrower need to understand about this very important requirement?

VA loan occupancy requirements are described in VA Pamphlet 26-7, Chapter Three, Section Five. Titled, “The Law On Occupancy,” this section has the definitive statements borrowers need to know about purchasing and occupying a home with a VA loan.

According to Chapter Three:

“The law requires a veteran obtaining a VA-guaranteed loan to certify that he or she intends to personally occupy the property as his or her home. As of the date of certification, the veteran must either

  • Personally live in the property as his or her home, or
  • Intend, upon completion of the loan and acquisition of the dwelling, to personally move into the property and use it as his or her home within a reasonable time.”

According to Chapter Three, the requirements listed above are enforceable for “all types of VA-guaranteed loans except IRRRLs. For IRRRLs, the veteran need only certify that he or she previously occupied the property as his or her home. Example: A veteran living in a home purchased with a VA loan is transferred to a duty station overseas. The veteran rents out the home. He/she may refinance the VA loan with an IRRRL based on previous occupancy of the home.”

Note that there are no exceptions, mentions of a “one year rule” for occupancy or other clauses that allow a borrower to move out of the property after a specified amount of time. However, VA loan occupancy rules do allow a borrower’s immediate family members (spouse, or in certain cases dependent children) to fulfill the occupancy requirement on the borrower’s behalf. From Chapter Three, Section Five:

“Occupancy (or intent to occupy) by the spouse or dependent child satisfies the occupancy requirement for a veteran who is on active duty and cannot personally occupy the dwelling within a reasonable time. In the case of a dependent child, the veteran’s attorney-in-fact or legal guardian of the dependent child must make the certification and sign VA Form 26-1820, Report and Certification of Loan Disbursement.”

Additionally, “Occupancy by the spouse may also satisfy the requirement if the veteran cannot personally occupy the dwelling within a reasonable time due to distant employment other than military service. In these specific cases, consult your Regional Loan Center (RLC) to determine if this type of occupancy meets VA requirements. Note: The cost of maintaining separate living arrangements should be considered in underwriting the loan. For an IRRRL, a certification that the spouse or dependent child (or children) previously occupied the dwelling as a home will satisfy the requirement.”

What about borrowers who are not married? Chapter Five states:

“Single or married servicemembers, while deployed from their permanent duty station, are considered to be in a temporary duty status and able to meet the occupancy requirement. This is true without regard to whether or not a spouse will be available to occupy the property prior to the veteran’s return from deployment.”

And finally, Chapter Five adds the following about “intermittent occupancy” as it applies to the VA borrower with a new purchase VA home loan or cash-out refinance loan:

“The veteran need not maintain a physical presence at the property on a daily basis. However, occupancy ‘as the veteran’s home’ implies that the home is located within reasonable proximity of the veteran’s place of employment. If the veteran’s employment requires the veteran’s absence from home a substantial amount of time, the following two conditions must be met:

• The veteran must have a history of continuous residence in the community, and

• There must be no indication that the veteran has established, intends to establish, or may be required to establish, a principal residence elsewhere. Use of the property as a seasonal vacation home does not satisfy the occupancy requirement.”

For more information on these rules, contact the VA directly by calling 1-800 827-1000.

Do you have questions about VA loans? Ask us in the comments section.

 

15 Comments
  1. Vincent Garcia

    California Veterans Affairs financed my condo loan at the rate of 6.1%. almost seven years ago. I have been trying to get a better rate but no one will touch a Cal Vet loan. My question is why and is there anything I can do to get a better rate. Thank You!! Vince Garcia

    • Joe Wallace

      Have you tried applying for a VA refinancing loan at www.valoans.com? (A private company, not a government website)

  2. Billy Trammel

    I understand that there are residency requirements for when the veteran must occupy the property as a primary residence, but are there any guidelines/requirements regarding how long the veteran must maintain the property as his primary residnce?

    • Joe Wallace

      The VA does not provide any "expiration" for the occupancy requirement--except for cases where the property is refinanced with a VA IRRRL or a non-VA loan, or when the VA loan has been paid off. In those cases the occupancy requirement ends when the original VA loan is paid in full.

      • Billy Trammel

        Thank you for the reply. So since there is no stated "expiration" (i.e. maximun) then there is also so stated duration (i.e. minimum) either, correct?

        • Billy Trammel

          What I meant was: Since there is no stated “expiration” (i.e. maximum) then is also mo stated duration (i.e. minimum)?

          • Joe Wallace

            Unless you sell, use a VA IRRRL refinance, or otherwise pay off the original VA loan, you're bound by the terms of the occupancy agreement you signed at closing time. Hope this helps!

  3. Luis Martes

    We bought our first home on January 2014. Is a two story home and he has severe a back condition the stairs are making his situation worst to the point that is affecting our family. We are looking at a single level house that we want to purchase. What is our best solution rented or selled. We want to use the Va certificate again.

    • Joe Wallace

      If you want to use your VA loan benefits a second time you would need to sell the home or pay the original loan in full in order to apply for restored VA loan entitlement.

  4. Mathew O

    I recently moved to accept a new job position. I am trying to sell my house that was purchased with a VA loan. If I understand this clause, I am in default if I have a new job that is an "unreasonable" (400 miles) distance away. I am in the process of putting the house on the market. How can I sell this home without going into default or foreclosure if I cannot maintain residence?

    • Joe Wallace

      We recently phoned the VA for clarification on occupancy issues. What we learned is that if you took occupancy of your home after closing time within the required time and occupied the property as your primary residence, you would be able to sell your property as described in the question without being in violation of the VA occupancy rules. It's my understanding based on this call that the VA has interpreted the occupancy rule in such a way that the occupancy requirement is fulfilled when you move in after the closing date to take possession of the home.

  5. Spiderbug

    I am a government worker. My family and I are looking to transition to Florida, however the occupancy requirements have us at a standstill. I have already received a pre-quail for my VA Loan. But when we were assigned a loan officer they said I was not eligible or did not meet the occupancy requirements for the VA Loan. Our situation is as follows… Our current lease is up in April 2015. We want to move to Florida after the lease is up here in Virginia. I am currently seeking to transfer employment to another government agency in Florida near the residence that we would like to purchase. I would like to move my family in the home until I am able to transfer to the residence permanently. Will this meet the requirement for occupancy? This will be our second time using the VA Loan. My spouse is from the area of we would like to purchase a home. In fact we both are from Florida. Are any thoughts on this situation?

    • Joe Wallace

      Technically there may be a way to meet the occupancy requirements via delayed occupancy of the home--VA rules require occupancy within 60 days but arrangements could be made to take occupancy of the home no more than 12 months after the loan closes. That said, this is at the discretion of the lender and requires lender participation. If you do not have employment secured in the area where the home is located, this may be an issue--the lender standards may require you to have a job lined up in the local area in order to approve the loan. That said, a spouse can take occupancy to meet the occupancy requirement while the borrower is away. Best advice--call the VA for advice at 1-800 827-1000.

  6. charlie

    do you have to call the VA Office to let them know you have moved in after you closed the house?? how would they know if I moved in or not??

    • Joe Wallace

      You and the lender would agree on a date to take possession of the property.

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