A VA home loan is a mortgage loan backed by the Department of Veteran Affairs (VA) to assist veterans, active-duty service members, reserve members, National Guard members, and some surviving spouses, become homeowners.
The VA stipulates the type of properties that can be financed with a VA home loan. Here is a list of the types of homes you can purchase with a VA home loan.
Single-family homes are properties commonly purchased under the VA home loan program. Single-family homes include traditional homes or properties in a Planned Unit Development (PUD).
Multi-unit properties are the division of multiple units, each independently rented to different tenants. Apartments, duplexes, and triplexes are examples of multi-unit properties. Those who qualify with a VA loan can purchase up to a four-plex one-family residential unit on a multi-unit property, provided that the buyer occupies one of those units as their primary residence.
Condominiums are available for eligible borrowers, but they need to be approved by the VA first. Your mortgage lender and real estate agent can assist you in finding acceptable condominium units on the VA’s list that meet your needs.
Manufactured homes are on the list of acceptable properties if they meet the VA’s minimum property requirements. However, because these properties depreciate over time, it can be challenging to find a mortgage lender that will finance these properties.
New construction homes. The VA will also provide financing for you to build a new home. However, it can be a challenge to find a lender willing to fund the entire construction of your new home. Instead, you can acquire a construction loan from a local builder or lender, and once the building of your home is complete, you can refinance the construction loan into a VA home loan. It can be helpful to research construction loans beforehand and ask your lender or builder if they make exceptions for military families.
Properties you can’t finance with a VA home loan
Funding from VA loans is only acceptable for the primary residences of those who qualify. Based on these criteria, you can’t use a VA loan to purchase a solely home as an investment, purchase a commercial property, buy unimproved land, or purchase a home outside of the U.S and its territories (Puerto Rico, Guam, Virgin Islands, American Samoa, and Northern Mariana Islands). Ask your lender what properties they will finance with a VA home loan because some lenders have additional property restrictions.
VA renovation loans
Qualifying for a VA renovation loan is similar to qualifying for a traditional VA loan. You must meet the minimum VA mortgage requirements and have enough VA entitlement for the loan amount. Eligible military borrowers can choose from three VA renovation loan options, allowing them to buy or refinance a home and receive coverage for renovation costs.
VA loans for remodel and repair a home. This VA renovation loan rolls the purchase price of the home and the costs of any expected repairs or improvements into one loan, and therefore only one monthly mortgage payment.
The total amount you can finance depends on the estimated “as-completed” value of the home, which is the market value of the property after all renovations and/or repairs are complete. There are some limits to what renovations you can make using a VA renovation loan, so it’s best to speak with your loan officer if you’re interested in buying a home that needs to be renovated or repaired.
VA energy efficient mortgage. This VA loan allows you to finance the cost of improving your home with insulation, storm windows and doors, solar heating and cooling systems, and new water heaters.
Supplemental VA loans. You can apply for a Supplemental VA loan in addition to your original VA loan to “improve the basic livability or utility of the property,” according to the VA Lenders Handbook.
If you are interested in purchasing and renovating a home or repairing a home with a VA home loan, ask your lender to discuss these loans with you.
Refinance VA loans
If you already have a VA home loan, the VA allows you to refinance your mortgage with a VA Streamline Refinance, also known as an interest rate reduction refinance loan (IRRRL), if you want to refinance to a lower interest rate or refinance to a fixed-rate mortgage from an adjustable-rate mortgage. Most VA lenders require a minimum credit score, income or appraisal, and no late mortgage payments within the last year.
You can choose a VA-backed Cash-out Refinance loan if you have a VA loan or a Conventional loan, want to take out money from your home equity to pay off debt, pay for school, make home improvements, or take care of other needs. Lenders require a minimum credit score and appraisal, your home must be your primary residence, and you may need to pay a VA funding fee at closing.
Applying for a VA home loan
When you apply for a VA home loan, you must provide your Certificate of Eligibility (COE), which is a document proving you meet the VA’s military service requirement, to your mortgage lender. As you’ve seen, those of you who qualify can choose from a variety of properties to call home.
VA home loans help veterans and active duty service members become homeowners in recognition of their dedicated service. VA home loans can help you purchase, remodel, build, and maintain a home to meet the needs of you and your family. Speak to your lender to find out if you meet their eligibility requirements so you can take advantage of the benefits of this valued mortgage loan program.