What You Need to Know About VA Loan Occupancy Rules
What are the rules for occupancy when you are approved for a VA home loan? Most government-backed purchase loans have an occupancy requirement. Occupancy in this case means that you intend to live in the property as your full-time residence or have a spouse or approved dependent do so on your behalf.
Any loan with a government guarantee such as FHA mortgages, USDA home loans, and yes, VA mortgages, stipulate that the property to be secured for the mortgage must be owner-occupied within a specified period of time as the borrower’s primary residence or home address.
VA loans require the buyer to certify in writing that the home securing the VA mortgage as collateral will be used as the buyer’s home and not as an investment property, second (non-primary) home, or vacation home.
What Constitutes a Primary Residence?
According to VA Pamphlet 26-7, the VA Lender’s Handbook, the borrower must certify that they intend to personally live in the home or “…intend, upon completion of the loan and acquisition of the dwelling, to personally move into the property and use it as his or her home within a reasonable time.”
A primary residence is basically, in the eyes of the Department of Veterans Affairs your home address where you get your bills, your personal mail, etc.
Do You Have to Occupy a Home Purchased with a VA Loan?
When you purchase property with a VA mortgage, you are expected to occupy the home as your primary residence within a reasonable time after closing. That time period is normally 60 days, but you and your loan officer can negotiate this.
That is especially helpful in cases where the buyer is still serving elsewhere and cannot physically relocate due to a deployment, temporary duty or TDY, attendance at professional military education programs, permanent change of station moves, etc.
What is required to get an extension on the move-in time above and beyond 60 days? The borrower must certify in writing that she intends to occupy the home “at a specific date after loan closing”, and there is, “a particular future event that will make it possible for the veteran to personally occupy the property as his or her home on a specific future date.”
Renegotiating the occupancy date does have its’ limits–VA loan rules found in VA Pamphlet 26-7, Chapter 3 state clearly that 12 months is the upper limit.
Other Delayed Occupancy Issues With VA Mortgages
There are other reasons why a borrower may not be able to move into a home purchased with a VA mortgage right away. One of those? Renovations. If the home is being repaired, renovated, or remodeled in conjunction with a VA mortgage loan, the home may not be habitable at closing time.
Chapter Three of VA Pamphlet 26-7 states:
“Home improvements or refinancing loans for extensive changes to the property which will prevent the veteran from occupying the property while the work is being completed, constitute exceptions to the “reasonable time” requirement.”
In these cases, the borrower is required to certify in writing that they will “occupy or reoccupy the property as a home upon completion of the substantial improvements or repairs.”
Note that there is no time frame for when such projects must be completed after closing, it’s likely you and your loan officer will have to negotiate this time frame based on the specifications of the work being done and its complexity.
What If the Borrower Cannot Occupy?
The loan applicant is not the only person who can occupy the residence to meet the VA occupancy requirement. Spouses and qualifying dependent children (the term used by the VA) may be able to meet this obligation according to Chapter Three of the VA Lender’s Handbook;
“Occupancy (or intent to occupy) by the spouse or dependent child satisfies the occupancy requirement for a veteran who is on active duty and cannot personally occupy the dwelling within a reasonable time.”
When a dependent is needed to meet the occupancy requirement, VA loan rules say the veteran’s attorney-in-fact or legal guardian of the dependent “must make the certification and sign VA Form 26-1820, Report and Certification of Loan Disbursement.” Military spouses are allowed to occupy the home instead, “if the veteran cannot personally occupy the dwelling within a reasonable time due to distant employment other than military service.”
How Does the VA Certify Occupancy?
The VA requires the borrower to certify their intent to occupy on two documents.
- VA Form 26-1802a, HUD/VA Addendum to the Uniform Residential Loan Application
- VA Form 26-1820, Report and Certification of Loan Disbursement
In typical cases, the signed documents listed above are enough to satisfy the VA, and VA loan rules state that the lender is permitted to accept these certifications “at face value unless there
is specific information indicating the veteran will not occupy the property as a home or does not intend to occupy within a reasonable time after loan closing.”
What is the VA lender instructed to do if there IS a reasonable doubt? According to the VA official site, the lender must decide if “a reasonable basis exists for concluding that the veteran can and will occupy the property as certified.
Myths About VA Loan Occupancy Rules
Occupancy does not necessarily mean you are physically living in the home on a daily basis. VA loan rules accept that some may have intermittent physical occupancy, but in general, the home must be reasonably expected to be the main address, taking factors like proximity to work into consideration.
VA loan rules state that when employment “requires the veteran’s absence from home a substantial amount of time”, certain conditions must be met as a condition of loan approval:
- The borrower must be able to show “a history of continuous residence” in the local area AND;
- There must be “no indication that the veteran has established, intends to establish, or may be required to establish, a principal residence elsewhere”.
Some websites and blogs about VA loans perpetuate myths about VA home loans whether by accident or ignorance of the rules.
One good example of this where occupancy is concerned? A quote from a 2020 blog entry on a third-party website discussing how soon you can sell a home purchased with a VA mortgage. “Basically, anyone getting the loan must live in the home, ruling out renting the property, using the building exclusively for work purposes or allowing friends or non-eligible family members to live there.”
There is much in the above statement that is not entirely true, and some that is not true at all. VA Pamphlet 26-7, Chapter 7 does state that any VA borrower using a VA loan benefit must certify occupancy, but there is no prohibition on allowing family and friends to live in the home.
What this article writer likely MEANS to say is that there is no way a non-eligible friend or non-eligible family member can fulfil the borrower’s occupancy requirement on the veteran’s behalf the way a spouse or eligible dependent child can.
VA Joint Loan Issues
VA loan rules also permit non-VA borrowers to apply with the veteran for a “joint loan”. The military member’s VA loan entitlement is charged for the veteran’s share of the mortgage only. Any non-VA borrower on such a joint loan is not required to meet the occupancy requirements because the non-VA borrower isn’t using the VA loan benefit and is therefore not subject to the same rules.
Can you rent out a home you purchased with a VA mortgage? If you have purchased a multi-unit property you are free to rent out the unused living units to anyone you like. That’s in direct contradiction to the statement made (see above) by a VA loan blogger saying you cannot rent out your property to someone else. Under the VA loan rules, some perceive a grey area around the issue of buying a home, living in it for a few years, then moving on and renting it out.
Some do this with VA loans, but on paper, the acceptable process is to refinance the property first with a VA Interest Rate Reduction Refinance Loan or VA IRRRl first. VA IRRRLs require you only to certify that you have previously used the property as your primary residence before the refi. Refinancing with a VA IRRRL is different from VA cash-out refinance options in this way.
>> Interested in a zero down payment possible home loan with no PMI? For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.
- VA Loan Basics
- The VA Loan, A Military Benefit You Should Use
- Best Practices for the VA Loan Process
- What Do You Need to Know About VA Loans?
- VA Loans, Investment Properties, and Deployments