VA Refinancing Loans and Occupancy Requirements

Borrowers who apply for new purchase VA home loans are required to sign a statement certifying they intend to live on the property purchased with the VA loan as their primary residence.

This is a requirement of the VA loans program and is non-negotiable. A borrower who fails to meet occupancy requirements could be considered in breach of contract on the VA mortgage loan.

Occupancy, once explained to the borrower and understood properly, isn’t normally a problem; the VA makes allowances for military duty, permanent change of station moves prior to moving into the home and other common military situations where some flexibility in the basic rules might be required.

But when it comes time to refinance a VA home loan, some borrowers don’t understand the occupancy requirements as well as they should—in some cases the requirement is identical, in others, there is only a requirement that the borrower certifies the home previously was the primary residence—current occupancy may not be required.

Which refinancing loans require occupancy?

That’s an important question. For VA Streamline Refinancing loans, the borrower is required to certify that the home was used as the main residence prior to the refinance. Since the goal for this type of loan is lower payments/interest rates, and no cash is given to the borrower against the equity in the home, no current occupancy is required.

That’s not true of VA cash-out refinancing. Since the borrower is getting cash back on the deal in most cases, continued occupancy is required. A credit check and an appraisal are also required for VA cash-out refinancing loans. The borrower must demonstrate he or she is a good credit risk and will have stable employment and income.

For borrowers refinancing with a VA IRRRL or Streamline Refinancing, it’s possible to refinance the original VA loan, move out and begin renting the property to a new tenant. VA borrowers who apply for cash-out refinancing loans don’t have this option on a single-unit or single-family residence. If the borrower is applying for cash-out refinancing for a duplex or other multi-unit property, the rental of any unused or unoccupied units is permitted as long as the borrower occupies one of the units.

Rate this item
(4 votes)

Top Reads This Month

  • FHA Refinance Loans and Interest Rates

    FHA mortgage loan rates and refinance loan rates stayed well below the 4 percent zone in the last days of the year--now that the new year is here, borrowers may not be sure how long the best-execution FHA mortgage loan interest rates reported at the end of the year may last. Do you know whether your’re ready to commit to…