Veterans of the military or Reserves have the opportunity to secure 100% financing with their VA benefit. With no down payment and flexible guidelines, it’s a favorable program for most veterans and their families. While there are many great things about this program, you may find that certain properties are ineligible for this type of financing.
Keep reading to learn which type of property you can buy with your 100% VA loan benefit.
The Common Properties You Can Buy With a VA Loan
The most common properties veterans buy with their VA loan is the single-family home. It has the least amount of restrictions from the VA. This stand-alone home has only its condition and the value of its comparable sales around it to help determine whether it’s eligible for VA financing.
As long as the home is in good condition and passes the VA appraisal, it has a good chance. It’s only other stumbling block would be if the comparable sales around it don’t support the purchase price you agreed to pay.
The two other common property types bought with VA financing are the townhome and condominium. While common, these two property types often pose a few more obstacles. Because you don’t own the exterior components of a townhome or condominium, the VA and the lender have to take into consideration the other homeowners in the development. They must also consider the association, its financial and organizational status.
It works best when you buy a property that already has VA approval, as you won’t experience any delays in trying to get the development approved. If you do find a development that doesn’t have VA approval yet and hasn’t ever been declined, it could add quite a bit of time to the approval process. The VA must determine that the association is financially secure and that they have everything in place for proper functioning. There cannot be any pending litigation against the association and a majority of the homeowners in the development must be owners, not investors.
Other Properties You can Buy With VA Financing
Single-family homes, townhomes, and condominiums may be the most common properties you can buy with VA financing, but they are not the only type. Here are a few less common types of homes you may buy if you find the right lender:
- Manufactured home – If your manufactured home is a permanent fixture on the home’s land, it may be eligible for VA financing. Just like any other home, it must meet the Minimum Property Requirements and be worth at least as much as you agreed to pay for it, though.
- Multi-unit property – You must buy an owner-occupied property with your VA financing in order to get approved. However, you can buy a multi-unit property (up to 4 units) with this program as long as you live in one unit. You can then rent out the remaining units and make a profit. This gives you the chance to try investment real estate without any money down or risky financing terms.
- New construction – The VA does allow borrowers to use this program for new construction; however, it may be hard to find a willing lender. New construction loans are temporary loans, which many lenders find too risky. There isn’t enough collateral on the loan for VA lenders to take a chance. Instead, they encourage veterans to secure the temporary financing elsewhere and then refinance it with their VA benefit when the home is built and ready to live in.
- Farmhouse – You can use your VA benefit to buy a farmhouse separate from the farmland. Your VA benefit is only for a residence; it’s not for income producing purposes. If the farmhouse happened to be on land and you will live in the home as your primary residence, though, it may qualify.
Determining if Your Home Qualifies
The only way to determine if certain property types qualify is to talk to the lender you’ll use for VA financing. Each lender may have a different requirement. For example, some lenders are just fine with multi-unit properties with VA financing and others are not. The same is true for any other property type above. The lender has the final say.
Before you proceed, you must make sure you meet the following requirements as they pertain to any type of property with VA financing:
- Owner occupancy – You must prove that you do not have any other type of home that you could call your primary residence. You must live in the home you bought with VA financing for a majority of the year.
- Meet the Minimum Property Requirements – A VA appraiser must make sure the property, no matter the type, meets the MPRs. This ensures the VA that the home is immediately livable, safe, and sanitary.
Again, discussing different properties with several lenders will help you determine how you can use your VA benefit to buy a home.