The Occupancy Rules for VA Loans Changed

The VA loan program is constantly undergoing changes, as are most of the benefits programs available to servicemembers. The changes are intended to strike a balance between helping veterans get the most out of the available programs and keeping the taxpayer burden low. Often these changes take place without a direct notification to those using the benefits, unless action is required on their part. Only if you keep good track of the news will you catch wind of any major changes to the program, and you may have to prowl the VA’s website on a daily basis to hear about any minor changes being made. For the most part, changes made to the program take effect on a certain date, so those who use their VA loan benefits before the date do not have the change applied to them (for better or worse), and those who use their benefits on or after the date do.

In 2012, an Act was passed called the Honoring America’s Veterans and Caring for Camp Lejeune Families Act of 2012 (isn’t it amazing how politicians will stop at nothing to squeeze as much “this is a good thing” language into an Act as they possibly can?). This Act caused major changes in the VA loan program, but probably the most significant one was the change to the occupancy requirement for VA loans. Before all you budding real estate emperors get too excited, the occupancy requirement is still there and is still unnegotiable. The change applies to any homes financed with a VA mortgage or refinanced into a VA guaranteed loan (streamlined or otherwise). The occupancy requirement for VA loans has always been that the veteran borrower must certify that he or she intends to occupy the residence being purchased as their primary place of residence.

That hasn’t really changed; borrowers are still expected to certify their intent to use the home as their primary residence and follow through with that certification as long as the home is under a VA-guaranteed mortgage. This certification must be in writing and submitted during the application process, and the residency must take place immediately upon sale or “within a reasonable period” which is never longer than 12 months. It is not allowed for borrowers to purchase a summer home or vacation home using their VA loan benefits, nor are any other purchases that might be considered intermittent occupancy-type homes.

Something many borrowers do not know, is that even prior to 2012, a spouse can fulfill the occupancy requirement on behalf of the veteran (or active servicemember) borrower. This can be a useful option in many regards, especially for jobs that require the veteran to work abroad for months at a time. Before the 2012 change in VA policy, only a spouse was able to fulfill the occupancy requirement on behalf of the veteran. Now, however, the Honoring America’s Veterans and Caring for Camp Lejeune Families Act of 2012 has allowed dependent children of the military member to occupy the home to meet occupancy requirements. However, this option doesn’t kick in automatically; it’s something that the veteran borrower needs to take action in order to take advantage of.

In order for the occupancy requirement to be fulfilled by a dependent child, the VA website states that the attorney of the veteran or the dependent child’s legal guardian must provide the certification that the dependent child is going to live in the home. From the VA website: “…the occupancy requirement is also considered met if a dependent child occupies, or will occupy, the property as a home and the Veteran’s attorney-in-fact or the dependent child’s legal guardian makes the occupancy certification. VA has amended VA Form 26-1820, Report and Certification of Loan Disbursement, to accommodate this change. The form was posted online on October 3, 2012… For any loan closed subsequent to that date, the new VA Form 26-1820 should be used.”

So remember, you can’t just have your dependent child live in the home and consider the requirement fulfilled, an attorney or legal guardian has to provide certification in writing to the VA before the occupancy can be considered. For more information on this, consult with a VA-approved lender or contact the VA directly.

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