Properties You Can Purchase with a VA Loan
VA Home Purchase Loans
VA home loans are made by a lender, such as a mortgage company, savings and loan or bank. The VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms.
VA loans have a lot of big benefits, from no down payment or mortgage insurance to lower average interest rates and limits on closing costs.
What can a VA loan be used for?
- To buy a home, including townhouse or condominium unit in a VA-approved project.
- To build a home.
- To buy a townhouse or condominium unit in a project that has been approved by VA.
- To buy a manufactured home or modular home. Most lenders are hesitant to offer these loans.
- To buy a multiunit property, typically up to a four-plex, provided you live in one of the units
- To simultaneously purchase and improve a home by installing energy-related features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/ caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.
- To refinance an existing home loan up to 100 percent of the home’s value in some cases or to refinance an existing VA loan to reduce the interest rate.
Questions and Answers
Can a veteran get a VA loan to pay off the mortgage or other liens of record on his or her home?
Yes. The following refinancing loans are available under the VA guaranteed home loan program:
To pay off the mortgage and/or other liens of record on the home. Veterans in some cases can borrow up to 100 percent of the home’s value, plus allowable costs and fees. The loan may include funds for any purpose which is acceptable to the lender, plus closing costs, including a reasonable number of discount points. A veteran must have available home loan entitlement
Can a veteran get a VA business loan?
No. but business loans may be obtained through the SBA (Small Business Administration). The SBA gives preference to veterans wishing to obtain small business assistance. For more information on this financing, consult your telephone directory for the SBA office nearest you.
Can a veteran get a VA farm loan?
No, except for a farm on which there is a farm residence which will be personally occupied by the veteran as a home. Veterans may have trouble getting financing if it’s a working farm.
Can a veteran get a VA loan to buy or construct a residential property containing more than one family unit?
Yes, but the total number of separate units cannot be more than four if one veteran is buying. If more than one veteran is buying, then one additional family unit may be added to the basic four for each veteran participating; thus, one veteran could buy four units; two veterans, six units; three veterans, seven units, etc.
In addition, if the veteran must depend on rental income from the property to qualify for the loan, the veteran must (a) show that he or she has the background or qualifications to be successful as a landlord, and (b) have enough cash reserves to make the loan payments for at least 6 months without help from the rental income. Lenders may have their own additional requirements.
Can a veteran get a VA loan to purchase a cooperatively owned apartment?
Generally not. Statutory lien requirements, and the fact that all or almost all of the members of the cooperatively owned apartment must be veterans who are using their entitlement, have presented considerable difficulties in obtaining VA financing for these purchases.
Can a veteran obtain a VA loan for the purchase of property in a foreign country?
No. The property must be located in the United States, its territories, or possessions. The latter consist of Puerto Rico, Guam, Virgin Islands, American Samoa and Northern Mariana Islands.
Can a veteran get a VA loan to purchase a mobile home on a plot of land?
Yes, but you should know right off the bat that most lenders are hesitant to loan on manufactured housing. These types of loans carry more risk since the likelihood of long-term depreciation is higher than for other types of loans. It’s common for veterans to obtain a construction loan from a builder or local lender, then refinance that loan with a VA mortgage once the home is completed.