VA guidelines

VA Loan Purposes

June 27, 2011

VA Loan Purposes

Every veteran or current military member who starts looking into how to use their VA home loan benefits quickly learns that VA loans are used to purchase or refinance houses, condominium units, mobile homes, duplexes or multi-family units. A bit more digging and the VA loan applicant also learns their VA loan benefits can be used to purchase OR build a house, condo or co-op unit.

VA loans are also available to refinance all of the above. But what else is a VA loan permitted to be used for?

A quick look at the rules reveals that a VA mortgage can be refinanced with a VA Interest Rate Reduction Refinancing Loan or Cash-Out Refinancing if the borrower qualifies.  But what about homes that need repairs or upgrades? There are VA home loans for these purposes, and loans available specifically to install money-saving energy-efficient improvements.

The VA has provisions for borrowers to purchase and improve a home at the same time–the buyer doesn’t have to apply separately for two different loans. The rules for improvements are precise and require the borrower to follow a specific procedure to purchase improvements and pay for services.

As mentioned above, VA loans don’t have to be used to buy an entire building. Borrowers interested in getting a VA insured loan to buy a condominium unit may do so, but only in condo developments that are VA-approved. Another special circumstance where a VA loan can be used is when the buyer wants a farm home–VA loans are available for such purchases, but if the deal includes farm land, the VA rules state, “…farmland is appraised at its residential value only.”

A seller may value and price the land based on its commercial value or potential commercial value. Any difference in the VA appraised value of the land (as residential property, not as a farming operation) must be made up by the VA loan applicant in cash and may not be financed. Farm property is allowed, but buyers should know that the VA does not approve loans for “undeveloped land” that has no specific construction date.

To put it another way, farm land is part of the purchase of a home, whether it’s existing construction or new construction. The sale of raw, undeveloped property must have a specific construction date for a new home to be built or it won’t be approved for a VA guaranteed loan.

The VA also permits loans for mixed-use residences. Business space and residential space in a single unit may be financed with a VA insured loan, but only if the business portion of the property takes up no more than 25% of the floor space.

As you can see, there are a variety of ways veterans can use their VA home loan benefits. Compare your needs with the options available and don’t assume you can’t get what you’re looking for just because it’s not a typical suburban house.

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  1. Freda Thomas

    I have never use my VA Loan. Can I use my VA benefits to landscape my yard to include installing a fence? If so how do I apply for the loan?

    • Joe Wallace

      Hi Freda, thanks for your question--I've answered it in depth in this blog post:

  2. Gary Collett

    I am wanting to purchase a farm with my VA loan, the property has a residence where I will live. Is this possible? I have heard many different things. any help would be great. Thanks

    • Joe Wallace

      VA loan rules state that the answer on farm loans is ""No, except for a farm on which there is a farm residence which will be personally occupied by the veteran as a home. The veteran may or may not conduct farming operations. If farming operations are to be the primary source of the borrower's income, then it must be established that the venture has a reasonable likelihood for success." For more information contact the VA at 1-800 827-1000.

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