VA Loan Reader Questions: Can I Rent A Home Purchased With A VA Loan?
VA loan questions come from all different perspectives–this one comes from a very unique angle:
“We are looking at leasing a VA home from a friend of ours who is in the military. (The owner) has a VA loan on the property. According to information on your website a person can not lease or rent a VA home loan to another individual because of the “primary residence” clause in the contract. He claims to have called his VA lender and they are telling him he can lease or rent the property. Can you set us straight?”
There are two factors at work when considering a situation like this. One is whether or not the borrower has the right to rent out a home purchased with a VA insured mortgage, and whether the renter would get into any trouble for doing so.
A VA home loan agreement requires the loan applicant to certify that the borrower intends to live on the property as his or her primary residence. But a borrower who wishes to refinance a home using a VA Interest Rate Reduction Refinancing Loan are only required to certify that their home was used as the primary residence on the original loan. Under such circumstances a borrower could conceivably legally rent out the property.
Of course, this assumes the property is a single-unit home. A multi-unit property could be rented legally as long as the owner uses one of the units as the primary residence and doesn’t violate the terms of the loan agreement.
A renter seeking a new home is doing so in good faith, and there’s nothing in the VA rules which addresses a situation from the renter’s perspective. That said, any renter who knows the home they want to occupy has been acquired with a new-purchase VA mortgage should know that a serious violation of VA loan rules could, depending on the terms of the mortgage, cause the loan to become due in full.
The owner could wind up having to terminate a lease agreement and evict his or her tenants if the rental situation is in violation of the loan agreement.
That would be true in any case–even if VA loan rules don’t address some of these issues in a particular circumstance, the home owner needs to carefully review the terms of the loan agreement to make sure there is no prohibition in the loan agreement between the borrower and the bank. That agreement is just as binding as the VA loan rules that govern the loan.