VA Loan Reader Questions: VA Loans For Business Purchases?
A reader asks, “I will be getting out of active duty this summer. I am a 1LT in the Army looking to start my own business. The business I am looking to purchase is two levels: the first is a bar/grill and upstairs is living space. Since My intent would be to live upstairs, would I be able to use a VA Loan for this purchase?”
The short answer to this reader question is, “It depends”. VA loan rules do permit loans for mixed-use property, as well as homes that are zoned for residential and commercial use. But VA loan rules state that the non-residential use of the property cannot exceed 25% of the floor space of the home.
Without ever having seen the property, it’s a good guess that the first floor business this reader describes would not fall into the 25% range.
But that does assume a great deal and borrowers shouldn’t simply assume–getting the specifics on the property are important. How much total square footage does the property have? How much total square footage does the non-residential portion make up? Get the numbers and do the math before you rule out the property–you never know!
There are other issues related to this “25%” rule. “Non-residential use” can be applied to things like storage areas, too–it’s very important to remember that the primary reason for the VA loan program’s existence is to help eligible veterans and currently-serving military members get into affordable homes. VA loan rules require all non-residential use of the property to be “subordinate” to the “residential nature” of the property.
If the home stops being a proper home because of the business concern, it would be in technical violation of VA loan rules. That’s a fairly subjective thing, but it does give you an idea of the spirit of the VA loan rules that govern this area.
Do you have questions about VA home loans? Ask us in the comments section.