If you used your VA loan benefit to buy your home, you certified that you would live in the home as your primary residence. The VA only allows loans that are for the home you will live in full-time. You cannot use the benefit to buy an investment property or second home. The program is meant to help veterans have an affordable way to buy a home. Once you close on the loan, though, how long must you occupy the home?
The VA Rules Regarding Occupancy
The VA doesn’t have a specific amount of time you must occupy the property. As long as the home has a VA loan, though, you are supposed to live there. What happens if you are relocated or have to move out because your family has outgrown the home? If you don’t want to sell the home, you may qualify for a VA exception.
The exception requires that you refinance your VA loan with the VA IRRRL program. Otherwise known as the Interest Rate Reduction Refinance Loan, this loan helps you lower your interest rate and/or change the term of your loan. More important, though, it eliminates the occupancy requirement. Once you refinance with the IRRRL, you are not required to live in the home.
Getting Approved for the VA IRRRL
Getting approved for the VA IRRRL is pretty simple. You don’t have to verify any of the following:
- Credit score
- Value of your property
All that you do have to verify is your housing payment history and that you have a net tangible benefit for the refinance. Your housing payment history must be timely for the last 12 months. Some lenders may allow one late payment during that time, but it cannot be within the last 3 months. Your net tangible benefit needs to be some type of benefit for refinancing. The VA wants to make sure that it makes sense for you to refinance since it will cost you money and it could restart your term.
The most common benefits are a lower interest rate, lower payment, or less risky term. For example, if you are able to lower your interest rate by 1%, you would have a lower payment. You could also refinance into a different term. Let’s say you originally had an ARM loan but had the opportunity to refinance into a fixed rate loan. The fixed rate loan poses a lower risk, which would give you the net tangible benefit.
Reusing Your VA Benefit
Where the real exception to the rule comes in is if you want to reuse your VA benefit. Normally, once you use your VA benefit, you cannot reuse the entitlement until you sell the home and pay off the loan. If you don’t pay it off, and rather keep the original VA loan, but move out of the home, you may be able to reuse your remaining entitlement.
Every veteran starts with $36,000 in entitlement, which entitles you to a $144,000 loan. The VA guarantees 25% of the loan. Since the average home price in many areas is above $144,000, the VA also provides bonus entitlement to help you buy the home you want. The bonus entitlement gives you access to a loan up to $453,100.
If you used some of your entitlement on the original loan, it remains with that home, even if you refinance with the VA IRRRL. Because you refinanced with the IRRRL, though, you may be able to buy another home with your remaining benefit. Let’s say you bought a home for $253,100 originally. That leaves you with $200,000 in entitlement for another home after refinancing with the IRRRL program.
This would be a one-time exception to the rule, though. Once you refinance your original loan and buy another home, you would not be able to reuse your benefit until you paid the loan off in full and sold the home. There is no certain time you must occupy the home, though. If you want to sell after a year, that is up to you. The only time you might come across minimum occupancy requirements is when you try to refinance your VA loan with the VA IRRRL. Certain lenders may require that you have a 12-month housing history to ensure that you are a good risk based on your housing payment history.
If you want to sell your VA home or you want to refinance it and move out, but keep the home, you can do so as long as you qualify for the loan. The VA doesn’t require you to occupy the home for a certain length of time. This gives you a little more leeway than you thought with your VA loan benefit.Click to See the Latest Mortgage Rates»