Military Retirement on the Horizon? What You Need to Know About VA Occupancy Rules
For the men, women, and surviving spouses of those who have served in the U.S. Armed Forces, the VA Home Loan Program offers a host of features and benefits designed to streamline the home buying experience. Because the the VA home loan is backed by the federal government, lenders are able to offer these loans with less restrictive requirements, including lower credit scores and debt-to-income.
Most lenders offer VA loans with no down payment and allow you to roll the one time funding fee into your loan. Provided you qualify for a VA loan, there are some very specific VA occupancy rules you should be aware of if you’re preparing to retire in the next twelve months or less.
The Basics of VA Occupancy Rules
Primary residence only – The VA loan may only used to purchase a primary residence — second homes or investment properties don’t qualify.
Occupancy date – VA occupancy rules require service members set an occupancy date no greater than 60 days after closing. If your retirement date falls after those 60 days, your spouse is allowed to take occupancy of the residence until you’ve officially retired and are ready to move in. In some cases, your dependent child can take occupancy, but there is additional paperwork involved (and some lenders won’t allow it).
Occupancy extension – The VA will consider some exceptions allowing up to 12 months following closing, but only on a case-by-case basis. For a single person planning to retire within the next 12 months, you may be able to negotiate a later occupancy date. You want to be sure to include a copy of your application for retirement along with your request for an extension to your lender. In the case of a married couple, it’s important to note that lenders are required to consider the cost of separate living expenses as part of your debt-to-income when processing your loan. If you’re purchasing a home that requires any repairs or upgrades you’ll need to certify the occupancy date and again following completion of the work when you reoccupy the property.
Income qualifications – While most lenders will evaluate your ability to pay the mortgage based solely on the estimated amount of your retirement, some lenders may consider qualifying your loan based on either your current full-time income or your retirement income, whichever is less. Retirement income includes a pension from previous employment, Social Security, as well as your military retirement pension.
The VA home loan can be the ideal way to make your purchase of your retirement home easy and economical, provided you understand the VA occupancy rules and requirements. Contact Embrace Home Loans to learn more.