VA Loan Occupancy Requirements: A Reader Question
A reader asks, “We are stationed abroad and my husband may be retiring next summer. We found a house we would like to purchase – can we use a VA loan – does the soldier’s and sailors relief act have a provision for those who are purchasing ahead of a possible move, if no one in the family can occupy? If the member is serving an assignment in a combat zone, does that make any difference?”
“Are the rules different for retirees buying a home with their VA loan (me)? The home is in a vacation area, so we *could* use it as a vacation rental. If I read the rules correctly, if we rent it out it becomes income property, not a primary residence, therefore we would violate the rules for a VA loan.”
There are several issues raised or implied by this reader question. Let’s tackle them by starting with the VA loan occupancy question. VA loans do require the borrower to take full-time occupancy of the home within a “reasonable time” after the loan closes. However, in some cases the VA will allow exceptions–the borrower will have to make arrangements with the lender–for delayed occupancy but this may not exceed a 12 month wait.
Borrowers should discuss their specific circumstances with the lender to make arrangements for a delayed occupancy situation.
There are no different rules for military retirees than for currently serving borrowers with regard to basic VA loan procedures. A borrower who purchases a home and is on a deployment may not be held to the same loan occupancy requirements due to the nature of military service, but if there are co-signers or co-borrowers using the VA loan benefit, they would be required to observe the same occupancy requirement.
The reader is correct in interpreting the VA loan rules about rentals and vacation properties–VA loans are not permitted for seasonal or vacation homes, and the borrower cannot vacate the property and rent it out while still paying on either a new purchase VA loan or a VA cash-out refinance loan. The only time a borrower can vacate the home and rent it out while paying on a VA guaranteed loan is by refinancing into a VA Streamline Refinance loan which does not have the same occupancy requirement.
Borrowers can also vacate and rent once the new purchase VA loan is paid in full or refinanced with a non-VA loan.
Do you have questions about VA home loans or refinance loans? Ask us in the comments section.