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VA loans provide eligible homebuyers a handful of options to purchase or refinance a home. But what exactly does "home" mean, and what types of properties does the VA loan allow you to purchase with a VA loan?

Key Takeaways

  • VA loans are for primary residences only.
  • You can purchase a home, condominium, or multi-family home with a VA loan.
  • You can build a house with a VA loan.
  • You can't use a VA loan for commercial property or business use.

The VA loan is a mortgage option offered by lenders, such as a mortgage company or bank, and guaranteed by the Department of Veterans Affairs (VA). The VA doesn't act as a lender with VA loans but guarantees a portion of each loan against loss.

Since the VA loan guaranty helps protect lenders from loss, lenders can provide Veterans loans with atypical benefits and more favorable terms.

So what properties exactly are eligible for a VA loan?

Eligible VA Loan Uses

With all uses, besides the VA streamline refinance, the VA expects the homebuyer to utilize the home as their primary residence.

Homebuyers can use the VA loan to:

  • Purchase a single-family home or VA-approved condominium.
  • Purchase a townhouse or multi-unit property (up to a fourplex), provided you live in one of the units.
  • Build a new home.
  • Purchase a manufactured or modular home. The VA allows for it if the property meets the VA minimum property requirements, though most lenders do not actually provide these loans.
  • 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 the VA.
  • Refinance a current VA loan into a lower rate - known as the VA streamline or IRRRL.
  • Refinance a non-VA loan into a VA loan.
  • Refinance a mortgage to take cash out of the home's equity.

Common Questions on VA Loan Uses

Can I use the VA loan for a business loan?

No, you can't get a business loan through the VA loan program. The Small Business Administration is your best starting point if you're interested in a business loan. However, the VA loan is for homebuying and refinancing only.

Can I use the VA loan for a farm?

Using a VA loan for a farm isn't as clear-cut. The VA allows homebuyers to purchase a house on acreage with reasonable comps for the VA appraisal. However, the VA typically does not allow purchasing a working farm.

Can I use a VA loan to purchase property in a foreign country?

No, you can't use a VA loan to purchase land in a foreign country. Properties purchased with a VA loan must be in the United States or its territories. The latter consist of Puerto Rico, Guam, Virgin Islands, American Samoa and the Northern Mariana Islands. Keep in mind that while the VA allows it, most lenders serve the United States and may not offer VA loans in U.S. territories.

Can I use a VA loan to purchase a mobile home on a plot of land?

The VA allows mobile home purchases if they meet the VA's minimum property requirements, including being affixed to a permanent foundation. However, most lenders do not lend on mobile or modular homes. These types of residences carry more risk since the likelihood of long-term depreciation is higher than for other homes types.

Can I use 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. Also, the Veteran must intend to occupy one of the units as their primary residence.

If more than one Veteran is buying, then one additional family unit may be added for each Veteran participating. For example, one Veteran could buy four units; two Veterans, six units; three Veterans, seven units, etc.

Additionally, if the Veteran depends on rental income from the property to qualify, the Veteran must show they have the background or qualifications to be a successful landlord. They must also have enough cash reserves to make the loan payments for at least six months without help from the rental income.

Lenders may have additional requirements. You can learn more about VA loan multi-family requirements here.

Can I get a VA loan to purchase a cooperatively owned apartment?

Generally, using a VA loan for a cooperatively owned apartment is not possible. 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.

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