Breaking Down the VA Loan Occupancy Rules For Veterans

VA Loan Occupancy Requirements

VA loans are accessible to eligible veterans, active-duty service members, former military personnel, and qualifying spouses. These loans come with numerous advantages, including minimal or no down payment, reduced closing costs, and the absence of a private mortgage insurance mandate.

However, it’s crucial to be familiar with and adhere to the VA loan’s occupancy stipulations, which are designed to ensure the property is used appropriately. To confirm your eligibility, it’s important to review the VA loan occupancy requirements.

Occupancy Criteria for Residences 

A property financed with a VA loan must serve as your primary residence. VA loans do not cover the purchase of second homes or investment properties. Moreover, you are expected to occupy your new home within a generally accepted period, typically 60 days following the property’s closing date.

Should there be any construction or renovations delaying your occupancy, this is considered a “delay” in meeting the occupancy criteria. In such instances, your lender might ask for extra documentation if these delays extend your move-in timeline.

Occupancy Rules for Families If you’re stationed away from your usual residence, your spouse is allowed to fulfill the home occupancy requirement on your behalf.

Additionally, if you’re on active duty or away, your children and other dependents can reside in the home. Nevertheless, fulfilling the occupancy criteria under these circumstances requires extra documentation. To comply with the VA’s occupancy regulations, a legal statement from your attorney or the dependent’s legal guardian confirming that the occupancy conditions have been satisfied is necessary. If a spouse or a dependent can meet this requirement, residency concerns won’t be an issue for you and your family while you’re serving.

However, it’s worth noting that some lenders may not accept a dependent’s occupancy as meeting the requirement.

VA Loan Occupancy Requirements for Refinancing 

For certain refinancing options, VA occupancy guidelines are applicable, though not for all types. A VA cash-out refinance demands a new appraisal and credit evaluation, along with the borrower’s attestation of occupancy for the refinanced loan.

In contrast, a VA Interest Rate Reduction Refinance Loan (IRRRL), also known as VA Streamline Refinance, only requires the borrower to verify that the property was their main residence during the term of the original VA loan. The VA Streamline Refinance aims to offer borrowers reduced interest rates and lower mortgage payments among other benefits.

Sometimes, a VA Streamline Refinance loan might be utilized to bypass the VA occupancy requirements, allowing the property to be rented out.

Occupancy Guidelines for Deployed Active-Duty Service Members 

Deployed service members, even those without a spouse or dependents residing in the home, can meet the VA loan occupancy criteria.

However, lenders might ask for additional documentation to confirm:

• The property is your primary residence.
• You continuously occupied the home before deployment.
• You haven’t relocated and don’t plan to relocate.

If you’re deployed and serving on active duty, it’s advisable to consult your lender for any specific documentation they might require.

Purchasing a New Primary Residence While Renting Out Your Previous Home with a VA Loan 

After residing in your home for at least 12 months, or if you’ve lived there for less than 12 months but received new stationing orders, you’re permitted to lease your property. The tenant doesn’t need to be affiliated with the military. This scenario enables you to rent out a property financed with a VA loan after fulfilling the VA’s occupancy requirements.

Renting Out Your Home Using an IRRRL 

While Acquiring a New Home After making six consecutive monthly mortgage payments, you might be eligible for an Interest Rate Reduction Refinance Loan (IRRRL) on your current home. Refinancing isn’t a prerequisite for securing another home with a VA loan, but it allows you to maintain your existing home as a rental while purchasing a new one.

When you approach your lender about buying a new home using your VA benefits, they will inform you about your remaining entitlement and whether a down payment is necessary. Even with rental income from your previous home, you must meet your lender’s financial criteria to ensure affordability for both properties.

VA Loan Occupancy Requirements FAQs

Navigating the complexities of VA loan occupancy requirements can be challenging, but you’re not the only one seeking clarity. Below, we address some of the most common queries.

Is there a specific duration for occupancy? 

While there’s no universally fixed duration, documentation typically specifies that the borrower should reside in the property for a minimum of 12 months. However, under certain conditions, this requirement can be adjusted through discussions with your VA lending institution.

What about occupancy if I’m nearing military retirement? 

For individuals anticipating retirement from the military within the upcoming year and looking to secure a loan for home purchase, there are additional criteria to meet. It’s necessary to submit your military retirement application and demonstrate financial capability for mortgage repayments. Recognizing the unique circumstances of retirees, VA loans may offer the flexibility of postponing occupancy for up to 12 months.

Does the VA verify occupancy? 

While VA lenders generally rely on their discretion to ascertain compliance with VA loan occupancy guidelines, they are responsible for investigating any doubts regarding adherence. Ultimately, it falls upon the lender to decide if the borrower has met or breached the VA’s occupancy stipulations.

The Bottom Line 

VA loans provide invaluable assistance to qualified veterans, active service members, and their spouses in purchasing homes, accompanied by several advantages. Nonetheless, it’s imperative to grasp the various requirements and obligations, including the critical occupancy rules—such as the move-in timeline, residency duration, and adherence to occupancy guidelines under deployment or work-related travel circumstances.

Considering a refinance or aiming to buy a new property? Start your mortgage application process with Elevation Mortgage today.