What Are the Lesser-Known VA Loan Guidelines?

Robin Kocherhans Robin Kocherhans / Published Oct 29, 2018, 3:20 PM

A military family stands together on a hill holding a flag

Some VA loan guidelines don't get talked about enough. Let's make sure you know about them before you start shopping for properties.

Eligible Properties

You can't buy just any type of real estate with a VA loan. There are restrictions on the types of properties that allow you to use your entitlement.

For example, cooperative properties, or "co-ops," are not eligible, and you can't buy a property to rent out or use as a vacation home.

In addition, vacant land doesn't qualify for a VA loan on its own, but it can be purchased as part of a package deal with a construction loan if you have a plan to build on it right away.

Finally, houseboats also don't ever qualify, because they don't have an immovable foundation.

Some other properties can be eligible, but it depends on your lender.

For example, mobile homes and modular homes are eligible, but not all lenders will want to work with you on them. Low VA Rates, however, can and will help you get this type of home.

Also, many townhomes and condominiums can also qualify, as long as the whole complex meets VA approval. You can check if a property is on the VA's online list of approved properties.

Funding Fees and Other Closing Costs

One of the most important VA home loan guidelines is that a funding fee is needed to obtain the loan. This fee goes into the fund the Department of Veterans Affairs uses to guarantee VA loans so veterans don't have to make a down payment or pay monthly mortgage insurance.

Other closing costs may include paying for a credit report and a VA appraisal, the origination fee, a recording fee, and taxes.

You may be able to reduce some of these costs in a couple of ways. For example, some sellers might be willing to help pay for some of them. And some closing costs, including the funding fee, can be rolled into the total amount of the loan to be paid off over time.

Reusing a VA Loan Entitlement

Many veterans may naturally assume that a VA loan is a once-in-a-lifetime benefit. However, you can actually reuse it several times throughout your life.

One way to do this is by completely paying off your VA loan, then requesting to have your full entitlement restored before applying for a new VA loan.

Another way is to sell your home to another veteran who agrees to use their entitlement in place of yours. However, this entitlement transfer will be for the full original amount, not just the remaining balance of the loan. If you find a buyer who agrees to this stipulation, you will then be able to apply to have your entitlement restored.

A third option is to have more than one VA loan at the same time. Some military personnel use this during a move to a new assignment.

This process is a little more complicated, but basically your entitlement can be divided over multiple loans, as long as the total amount borrowed doesn't exceed the conforming loan limit. If you're interested in learning more, check out this blog post for a more detailed explanation about how splitting your entitlement and getting a second VA loan works.

How a Past Foreclosure or Bankruptcy Affects VA Loans

You might think that a bankruptcy or foreclosure in your past—or your spouse's past—will make you lose your chance to qualify for a VA loan. Actually, you can still qualify if you can show a responsible credit history leading up to your loan application.

Some time will also need to have passed, though it's probably not as much as you think. Depending on the type of bankruptcy, it can be as little as 1–2 years. For a foreclosure, it can happen as soon as 2 years.

The reason for this shorter wait time is that a lender's main goal is just to make sure you can meet your monthly payments in the future.

We Can Help You Understand All of the VA Loan Guidelines

We hope these explanations of some VA loans guidelines help you make an informed decision. VA loans were set up to help veterans, like you, buy a home, and at Low VA Rates, we want to see that happen for as many veterans as possible.