What Can I Use a VA Loan For?
October 18, 2010 By Joe Wallace 2 Comments
There’s no such thing as a dumb question, and for first time home buyers one of the most basic VA loan questions is “What can I use a VA home loan for?”
This came up recently when a veteran asked whether or not a VA loan could be used to purchase a houseboat. The interesting thing is, while the VA does have a list of eligible loan purposes, it doesn’t specifically say yes or no to a houseboat purchase. Unfortunately for the buyer, since the VA does offer specific advice about mobile homes—requiring them to be attached to a permanent foundation in order to be considered real estate—a houseboat doesn’t seem to fit the main requirements for a real estate purchase.
But what DOES the VA consider an eligible loan purpose? There’s a long list, which includes the purchase or construction “of a residence”.
That includes condos and co-op units, as long as the VA loan applicant is going to live in one of the units as their primary residence. In cases like these, the VA requirements state the residence must not have more than four family units and one business unit—except when it comes to “certain joint loans”.
VA loans can be used to buy land where proposed construction of a new home will occur. And yes, VA loans may be used for proposed construction of a house on land the veteran already owns.
The rules for VA mortgages in this area include the VA stipulation that “a portion of the loan may be used to refinance a purchase money mortgage or sales contract for the purchase of the land, subject to reasonable value requirements”. That refinance option could be a big advantage to a veteran borrower in the right circumstances.
The Department of Veterans Affairs even has a provision for buyers who want to take out a VA mortgage to purchase and improve a home at the same time. The fixer-upper is a definite possibility for VA loan applicants.
These are just some of the VA-approved uses for a VA mortgage, and we haven’t even touched on the refinancing aspect…more on that in another blog post.
About Joe Wallace
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.