VA loans are more flexible than veterans think

What’s available to help veterans buy a home?
by Tom Kelly

Jim Kelley, a retired naval officer who spent much of his military career in Bremerton and Everett, Wash., said this winter’s record rains finally pushed him to look for a primary residence in a drier environment.

His master plan is to keep his Port Orchard, Wash., home for the summer and early fall yet live 7-8 months of the year in New Mexico or southern Arizona. Even though he purchased his Port Orchard home with a loan insured by the Department of Veterans’ Affairs, a Navy buddy told Kelley it would be possible to buy his next home with a VA loan because it would be the place in which he spends most of his time.

Typically, if a VA loan has been paid off and the property sold, home-loan eligibility can be restored for additional use. In addition, the VA offers a one-time only bonus eligibility can be restored if a prior VA loan has been paid in full but you still own the property…

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While federal regulations require that all loans insured by the Department of Veterans’ Affairs be used only to acquire a “primary residence” it is possible to purchase another home using the VA loan guaranty. As in many cases involving the use of real estate, the definition of primary residence is the place you live “most of the year.” So, if you use the home more than six months of the year, it can be defined as your primary residence.

“The law was not intended to help people enter the business of real estate and purchase lots of homes,” said Chris Michel, a former naval reservist. “The law was written to help people afford the home that they are going to occupy.”

However, “A VA loan can most definitely help purchase that next home or retirement home,” said Michel. “Hopefully in their retirement years, people are spending most of their time in what was their vacation home.”

The VA requires that you move into the home in a “reasonable” amount of time and that you keep it as your primary residence. If those are your intentions at the time you apply for the loan, then there is nothing to keep you from using your VA guaranty to purchase a second home or retirement property.

The perception that a VA loan guarantee can only be used once is incorrect. If your original VA loan was paid off, you are eligible to use the guarantee again. If you purchased a previous home with a VA loan and the buyer assumed your loan, your eligibility can be restored only when the assumer has paid off the loan. The only other alternative would be if the assumer is an eligible veteran who is willing to swap his or her available eligibility for yours.

For 2006, qualified veterans could get a no-down-payment purchase loan of up to $417,000. There is no maximum VA loan (with a down payment). Lenders typically lend up to four times the amount of a veterans entitlement without requiring a down payment.