The VA loan is a unique military benefit. It is similar to other benefits such as the GI Bill in that there is a time-in-service requirement, and you can apply for eligibility online at the VA official site. But VA loans are different than other military benefits because you are not guaranteed home loan funds simply by becoming eligible to apply.
Like all other home loans, VA loans require the borrower to credit qualify once eligibility has been established. Your VA home loan will be processed by a private lender who has been approved by the VA.
What VA Loans Are For
Your VA loan benefit is specifically for the purchase, refinancing, or construction of a home. VA loans are for real estate only, they cannot be used as personal loans, or in situations where the borrower applies to borrow more than the market value or sales price of the home with the intent of using the excess funds.
VA home loans are provided by participating lenders-your mortgage loan will not come from the Department of Veterans Affairs. However, the VA works with your lender to guarantee a portion of your loan, which lowers the risk for the lender and makes it easier for you to qualify for the mortgage.
VA loans can be used to purchase typical suburban homes, but also condo units, manufactured housing, and mobile homes. There are specific rules about condos-these must either be on or added to a list of “approved” condo projects. Special rules apply to manufactured and mobile homes; these must be fixed to a permanent foundation as a condition of loan approval.
VA loans can be used to buy, but also to refinance. You are allowed to refinance existing VA loans or apply to refinance a non-VA mortgage.
What VA Loans Are Not For
VA home loans cannot be used to purchase non-owner occupied property, investments, condo-hotels, bed and breakfasts, vacation homes, or “intermittent occupancy” properties. VA loan rules specifically require the borrower to occupy the purchased property, usually within a certain amount of time after closing as agreed to in your purchase agreement.
VA loans cannot be used for house boats or recreational vehicles. Since these cannot be taxed or classified as real estate, they are not eligible for a VA loan.
VA mortgage loans cannot be used for investment properties, but they may be used to purchase multi-unit properties (up to four individual units) so the borrower may become a landlord. However, VA occupancy rules require the buyer to occupy at least one of the units.
Your ability to count earnings from such rentals as part of your qualifying income may depend on a variety of factors including lender standards, state law, prior experience as a landlord, etc.
VA loans can be used more than once, they do not favor or discriminate against first-time buyers or repeat home buyers, and you cannot be penalized for early payoff of a VA mortgage. You can learn how to apply for eligibility for a VA loan at the VA official eBenefits website.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News