How Long Before I Can Rent My VA Loan Property?
Planning to rent your VA loan home? Understand the crucial occupancy requirements and timelines to ensure compliance and successful rental.
The VA loan program offers a significant benefit to eligible service members, veterans, and surviving spouses, facilitating homeownership with favorable terms. This program is designed to support the acquisition of a primary residence. These loans are not intended for purchasing investment properties or vacation homes.
Understanding the Occupancy Requirement
A fundamental aspect of using a VA loan is the occupancy requirement, dictating that the property must serve as the borrower’s primary residence. This means the home purchased must be where the borrower lives most of the time, not for rental income. Borrowers certify their intent to occupy the property during the loan application and closing process.
Borrowers are expected to move into the home within a “reasonable time” after closing, which the VA often defines as within 60 days. While the VA does not specify a mandatory minimum period of occupancy, many lenders require borrowers to intend to reside in the home for at least 12 months from the closing date. This initial period establishes the property’s status as a primary residence before it can be considered for rental.
Circumstances Allowing Earlier Rental
While the general expectation involves occupying the property as a primary residence, certain situations may permit earlier rental or delayed occupancy. For instance, if a service member receives orders for a military deployment or a permanent change of station (PCS), they may delay occupancy or rent out the property sooner than the typical 12-month period. In such cases, the occupancy requirement can be satisfied by a spouse or dependent child.
Other exceptions include unforeseen job relocations, allowing the borrower to rent out the property, provided the initial intent to occupy was genuine. If the borrower is nearing retirement within 12 months of loan closing, a delayed move-in date might be approved, requiring documentation of their retirement application and sufficient income to manage the mortgage. Properties requiring significant repairs to become habitable may also qualify for delayed occupancy for up to 12 months for renovations. For multi-unit properties, a borrower can immediately rent out the other units as long as they occupy one unit as their primary residence.
Renting After Meeting Occupancy Requirements
Once the borrower fulfills the primary occupancy requirement, generally after the initial 12-month period or an approved exception, they can move out and rent the property. This transition does not necessitate refinancing the VA loan into a conventional loan, as the original loan terms remain in effect. The borrower continues to be responsible for the mortgage payments.
Converting a VA-financed home into a rental property can impact the borrower’s future VA loan eligibility and entitlement. Renting out the previous primary residence can restore VA loan entitlement, allowing the borrower to purchase another primary residence. However, if full entitlement is not restored, a down payment might be required for subsequent VA loans. Borrowers considering this should notify their loan servicer and update their homeowner’s insurance policy to reflect the change in occupancy status to a rental property.
Implications of Non-Compliance
Failing to adhere to VA loan occupancy requirements carries implications for the borrower. If the intent to occupy the property as a primary residence was misrepresented at loan application, it can be considered mortgage fraud. Lenders and the VA may conduct periodic checks to verify occupancy, and discrepancies can lead to consequences.
A primary risk of non-compliance is the loan being “called due,” meaning the lender can demand immediate repayment of the entire outstanding loan balance. This action can place a financial burden on the borrower. Failure to meet occupancy requirements can negatively impact the borrower’s credit standing and jeopardize their eligibility for future VA loan benefits. Borrowers must maintain clear documentation and communicate proactively with their lender if circumstances change, affecting their ability to meet the occupancy terms.