VA Home Loans offer great benefits that set them apart from conventional mortgages, but they also come with unique rules and restrictions on what they can be used to purchase. Before you get your heart set on a specific house or condo, take a moment to learn what kinds of property that a VA Loan can help you acquire. After all, there’s nothing quite like getting a rejection on your loan application to derail your dreams of imminent homeownership!
When most people think of VA Loans, they visualize traditional, single-family houses, and that’s definitely what the majority of veterans use their VA Loan to purchase. That said, a house is not automatically VA Loan “friendly” just by virtue of being a house.
In order to be suitable for purchase with a VA Loan, a house must:
- Be intended to serve as the buyer’s primary residence. This means you can’t use the loan to buy a second house or a vacation home. You also cannot buy the house with the intention of making it an investment property, turning it into an office building, or renting it out.
- Be located in the United States. Because a portion of a VA Loan is guaranteed by the federal government, the prospective property cannot be located in a foreign country. However, eligibility is not just limited to the continental United States, nor are federally recognized U.S. territories excluded under this rule. So, if your dream home is in Alaska, Guam, Puerto Rico, or Hawaii, a VA Loan might still be in your future!
- Meet the VA’s Minimum Property Requirements (MPR). Simply put, you can’t use the loan for a house that’s falling apart at the seams or is dangerous to live in. The house doesn’t have to be 100% move-in ready or aesthetically perfect, but a dilapidated (or even “run-down”) property is unlikely to make the cut. Some common pitfalls include:
- Not enough space to reasonably accomplish daily tasks like cooking, sleeping, eating, and general “living.”
- A damaged or leaking roof.
- Structural issues with the house’s walls, foundation, attic, or basement.
- Lack of electricity.
- Heating, cooling, and other mechanical systems that are damaged, unsafe, or unreliable.
- Inadequate ventilation, especially in the attic, basement, and crawlspaces.
- The presence of hazardous materials, including lead paint, asbestos, or radon.
- Absence of a potable water supply, a water heating system, and/or a sanitary sewage system.
Although the first two are easy enough to figure out on your own, the third one is going to require the expertise of an independent VA appraiser. Appraisals are not meant to serve as home inspections; they’re not quite as thorough and are mostly just concerned with determining whether or not the house is safe, structurally sound, and sanitary. Still, a VA appraisal is mandatory if you want to purchase a house using a VA Loan!
Not too long ago, we discussed the differences between condos and houses. While both types of housing have their strengths and weaknesses, one thing they both have in common is that they can often be purchased with a VA Loan. In case it’s been a while since you read that post, here’s a refresher on the specific regulations placed on condo purchases:
…There are more rules associated with using the loan to buy a condo, but these policies apply to the condo complex/building—not the borrower:
- For existing buildings/complexes, at least 50% of the units must be owner-occupied, and at least 85% of owners must be current on all dues and fees.
- For newly constructed buildings/complexes, at least 75% of the units must be sold (even if the new owners haven’t moved in yet).
If you already have a condominium in mind that you’d like to purchase, the official website of the Department of Veterans Affairs can tell you whether or not a specific development already has their approval. And if your dream condo isn’t listed, don’t despair: you can work with your lender or real estate agent to obtain approval for the purchase.
VA Loans can make your dreams of home ownership a reality, but it’s important that do your research before you start looking at potential properties. One great way to do this is to consult with a VA Loan expert. If a lending group specializes in VA Loans, then they’ll certainly know what’s allowed, what’s not allowed, and what you can do now to protect your long-term financial well-being. And if you can find a lending group with over 30 years of combined mortgage experience, then you can rest assured that you’re in good hands!