Properties That Are Eligible for a VA Loan
VA home loans are issued by a lending authority, be it a bank, loan company, or mortgage provider. The VA guarantees the loan on behalf of the lender, with the whole process being designed to encourage financial institutions to lend veterans money on attractive terms.
VA loans offer a lot of benefits, including the ability to access a mortgage without requiring a down payment, access to interest rates that are below average, and reduced closing costs.
What can I use a VA loan for?
VA loans can be used for the following:
- To purchase a property, including a house or a condo or apartment in a project that has gained VA approval.
- To construct a residence.
- To purchase a pre-manufactured or modular home (many lenders are cautious about issuing loans on these types of properties.
- To purchase a multiunit that consists of multiple residences providing that the borrower resides in one of the properties.
- To buy a home with the intention of improving its energy efficiency via VA-approved methods; for example, through the installation of solar panels, advanced cooling and heating systems, weather stripping, and storm guards.
- To refinance an existing mortgage by up to 100% of the total value of the property or to refinance an existing VA loan as a means of reducing monthly repayments or the interest loan rate.
Questions and Answers
Is it possible for a veteran to use a VA loan to pay off an existing home loan or other liens of record on the property he or she lives in?
Yes. A number of refinancing loans can be accessed as part of the VA guaranteed home loan program. In some cases, veterans may be eligible to borrow an amount equal to 100% of the value of their existing property plus allowable costs and fees. The loan can include sums of money that are intended for use for activities that the lender deems to be acceptable in addition to the costs associated with closing. To access this, veterans must be entitled to a home loan under the VA program.
Is it possible for veterans to access a VA business loan?
No. However, veterans may apply for a business loan through the Small Business Administration (SBA). The SBA gives preferential treatment to veterans who are seeking small business assistance. Speak directly to your local SBA representative to gain further information on your business loan entitlements.
Is it possible for veterans to access VA farm loans?
No. The only situation in which this may be possible is if the veteran secures the loan against a farm residence in which he or she will be living. If the farm is classified as a working farm, it may be difficult to secure a VA loan against it.
Is it possible for veterans to secure a loan against a property that contains more than one residential unit?
Yes. However, the residential unit cannot consist of more than four separate units if the property is being purchased by one veteran. If the property is being purchased by more than one veteran, it may be possible to add a further family unit to the basic four for each veteran who is purchasing the property. Furthermore, if veterans will be dependent on the income generated by renting out the property as a means of qualifying for the loan, they must be able to demonstrate that they have the background skills and qualifications that will be necessary to function effectively as a landlord and have sufficient money in the bank to cover loan repayments for the next six months without depending on the rental income or requiring further loans. The requirements pertaining to multi-residency properties may vary from lender to lender.
Is it possible for veterans to use a VA loan to purchase an apartment that is owned as part of a cooperative?
Typically, no. Statutory lien requirements in combination with the fact that every resident of the cooperatively owned apartment needs to be veterans who use their VA loan to purchase their share of the property means that the use of a VA loan for this purpose is very prohibitive.
Is it possible for veterans to use a VA loan to purchase an overseas property?
No. Any properties against which a VA loan is secured must be located within the US and associated territories. This includes Guam, Puerto Rico, the Virgin Islands, the Northern Mariana Islands, and American Samoa.
Is it possible for veterans to use a VA loan to purchase a mobile home on a plot of land?
Yes. However, it is important to point out that the majority of lenders will be reluctant to issue loans on manufactured housing because they are more at risk of depreciating over a long period of time than other types of homes. Many veterans get around this by securing a construction loan and then refinancing that loan with a VA mortgage after construction is complete.