Can You Buy A House with a VA Loan?
Veteran Affairs mortgages (commonly known as VA loans) have allowed over 22 million service members to buy a home since 1944. This advantageous program allows qualified veterans, active duty members and their spouses to purchase a property with no down payment, low interest rates, no mortgage insurance and usually allows for a higher debt-to-income ratio than conventional mortgages. So, what’s the catch?
If you are considering buying a house with a VA loan, you must make sure that the property you have in mind can be financed through this type of mortgage.
- The house must be used as your primary residence
VA loans can only be used for houses that the borrower will live in within 60 days and will use it as his or her primary residence.
An exception is made for active duty members on a case-by-case basis: if the military member cannot move in within 60 days, in the case of deployment, for example, his or her spouse or minor child can satisfy the occupancy requirement in certain cases.
Another exception can be made if the borrower will be retiring within 12 months: he or she might be able to negotiate a later move-in date.
- The house must be in move-in condition
Properties purchased with VA loans must be “safe, sanitary, structurally sound and appropriately valued.” These Minimum Property Requirements (also known as MPRs) include mechanical systems in good working condition, dry basements and crawl spaces, no reported presence of termites or fungus, and so on.
If you have your eye on a property that might not meet these requirements, it will have to be remediated before the loan closes at your expenses or that of the seller. Although foreclosures are not excluded from VA loans, the fact that these properties are often sold as-is often disqualifies them.
- The house must not be an income property
Properties that are eligible for VA loans can be single-family homes, townhouses, condominium units in projects that have been approved for VA loans. Manufactured homes are theoretically authorized but can prove difficult to get approved by the lender. If you are planning to live in one of the units, multi-family homes with four units or less are also eligible.
However, any building whose highest and best use would not be residential cannot be purchased with a VA loan. This includes apartment buildings with more than four units as well as properties that could be used for business purposes, such as working farms or a property with a store attached. Outbuildings, like a horse barn on the property, or a large acreage, can also create some difficulties to get a property approved.
You can not buy a secondary or seasonal home with a VA loan and, although building a home with a VA home is allowed, buying raw land even to build in the future is not.
There is no cap to VA loans. However, if you are planning on buying a house with a VA loan above a certain limit, which is based on different levels depending on the location of the house you are interested in purchasing, you might need to put down a down payment, usually equivalent to 25 percent of the difference between the VA loan limit and the purchase price of the home.