If you are considering a VA home loan, you’ll want to be familiar with the program’s occupancy requirements before you apply–occupancy is a condition of loan approval and we’ll explore exactly what that means below.
The VA home loan is one of the most popular military benefits. This no-money-down mortgage is offered to military members who have served a minimum amount of time on duty, to veterans who have served that minimum time, and to certain surviving spouses of military members who have died as a result of military service.
The VA home loan is a government-backed mortgage issued by participating lenders. you can shop around for a lender that can work with your needs whether you want a typical house in the suburbs, a mobile home, condo, or even a farm residence that meets VA standards.
The benefits of a VA mortgage include the previously-mentioned zero down mortgage, a lower interest rate than conventional mortgages (VA loan rates and FHA mortgage rates are usually lower than conventional mortgages due to the government-backed nature of the loan), and no penalty for early payoff.
But the caveat for these loans is that VA mortgages are for owner-occupiers. You are required to certify that you will use the home you buy with your VA mortgage as your primary residence. These rules allow immediate family members to meet this occupancy requirement under the right conditions.
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How Serious Is The VA About Occupancy?
Federal law requires the VA borrower to certify in writing in a legally-binding document that they intend to occupy the home as the primary residence.
This applies to all borrowers who are financially obligated to the purchase of the home using a VA mortgage. In cases where borrowers are using their VA loan benefits with a non-veteran who does not have VA benefits, the occupancy requirement applies to the VA portion of the mortgage.
According to the Department of Veterans Affairs official site, “As of the date of certification, the veteran must either personally live in the property as his or her home,” or intend to personally move into the property within a reasonable time.”
That is codified in the VA Lender’s Handbook, VA Pamphlet 26-7. This rule applies to all VA forward mortgages used to purchase a home.
As mentioned above, the VA allows certain family members to meet this requirement on behalf of the borrower. This applies under specific circumstances as defined in the VA Lender’s Handbook. They include:
- Occupancy by the spouse or a qualifying dependent child for borrowers who are active duty and “cannot personally occupy the dwelling within a reasonable time.”
- Occupancy by the spouse is also possible in cases where the veteran “cannot personally occupy the dwelling within a reasonable time due to distant employment other than military service.”
- Occupying after retirement from military service may be permitted if the veteran certifies they will” retire within 12 months and wants a loan to purchase a home.”
What About Occupancy Interrupted By Military Service?
VA loan rules make exceptions to occupancy requirements for deployments and other types of military duty. Those who are deployed are still considered to be occupying the home. VA Pamphlet 26-7 states, “This is true without regard to whether or not a spouse will be available to occupy the property prior to the veteran’s return from deployment.”
Reasonable Occupancy Time Limits
In most cases, 60 days is the most you can delay occupancy without making prior arrangements with the participating VA lender. Time frames longer than 60 days may be approved under specific circumstances which include:
- Delayed occupancy due to repairs or renovations are approved but may be reviewed on a case-by-case basis.
- The borrower is able to personal occupancy of the property at a specific date longer than 60 days after loan closing, AND
- There is a “particular future event that will make it possible for the veteran to personally occupy the property” at a specific future date.
- Occupancy delays of more than 12 months are generally not allowed.
What About “Intermittent Occupancy”?
VA loan rules acknowledge that homeowners do not necessarily have a “physical presence” in the home on a daily basis.
However, the home must be the borrower’s primary address and they must not intend to establish another primary residence elsewhere. You are not permitted to use the property you buy with an VA mortgage as a seasonal home or a vacation home. Doing so DOES NOT meet the VA occupancy requirement.
Does The VA Enforce Occupancy Rules?
The short answer is yes. The VA official site reminds borrowers, “The lender may accept the occupancy certification 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.”
If a lender is in doubt that occupancy will occur, they are tasked with determining “on a reasonable basis” whether or not the occupancy rule is being met.
How Does The VA Certify Occupancy?
Part of your loan paperwork will include signing two forms that certify your intent, as the borrower, to occupy the home as your main address. They are VA Form 26-1802a, HUD/VA Addendum to the Uniform Residential Loan Application, and VA Form 26-1820, Report and Certification of Loan Disbursement.
One form is presented at application time, the other at closing time.
Do VA Occupancy Rules Apply For Refinance Loans?
VA occupancy rules apply for certain refinance loans, but not for others. A VA Cash-Out refinance mortgage, which requires both a new appraisal and a new credit check, does require the borrower to certify occupancy on the new loan.
However, for VA Interest Rate Reduction Refinance Loans, also known as VA Streamline Refinances or VA IRRRLs, the borrower is only required to certify the home WAS the primary residence during the original VA mortgage.
VA IRRRLs are intended to help the borrower get into a lower mortgage rate, lower payment, or some other tangible benefit. Some borrowers consider using a VA Streamline Refinance loan to get out of their occupancy requirement and start renting the property to someone else. And while that choice is not for everyone, it is a good option for those who may be considering such a move.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
