If you have an existing VA home loan, you already know about the VA occupancy requirement for these loans. But some homeowners are confused about VA occupancy rules especially when it’s time to refinance the mortgage (conventional or VA) with a VA refinance loan.
You may have heard about one type of home loan refinancing that requires occupancy under the VA program. But it’s not safe to assume that the features of one type of VA refinance loan are the same as another. There are VA refinancing options that allow borrowers to refinance a conventional mortgage to a VA loan, or an FHA loan to a VA loan.
In these cases, occupancy is always required the same as with a new purchase home loan. A veteran is required to live in the property he or she buys with a VA guaranteed mortgage loan.
It must be for the borrower’s personal occupancy, although a spouse (or in some cases the dependent children of the veteran) may fulfill the occupancy requirement on the borrower’s behalf.
When it comes to VA refinancing, if you get cash back on the deal or refinance from a non-VA loan to a VA mortgage, occupancy is a requirement.
The one type of option that does not require occupancy, the VA Streamline Refinance loan, requires the borrower to certify the home was previously the primary residence. If you want to refinance with the VA Streamline Refinancing or VA Interest Rate Reduction Refinancing Loan, you should know occupancy is not required once the home has been refinanced and the loan is closed.
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The VA Streamline loan requires the borrower to get a tangible benefit from the new loan such as lower monthly payments or a better interest rate. In the case of adjustable rate mortgages being refinanced, the tangible benefit would be moving into a fixed interest rate even if that rate is higher than the one currently being paid on the mortgage.
The added benefit of a Streamline Refinance loan is that you no longer have to maintain the residence as your personal home. You would be permitted to rent out the property to others once you have refinanced with this type of VA loan.
Note: refinancing may result in higher finance charges over the life of the loan.