If you are a veteran that served at least 181 days during peacetime or 90 days during wartime, you may be eligible for VA financing. This great program gives you access to 100% financing and flexible guidelines. What more could you ask for, right?
Before you jump headfirst into buying your first property with VA financing, though, you should know what type of properties you could buy with it.
Single-family homes are the bread and butter of most any loan program, including the VA loan. There typically aren’t any extra hurdles you have to jump through when you buy a single-family home, whether it’s an existing home or it’s from a community builder.
The only hurdle you may experience is if you happen to purchase a home that has a homeowner’s association. Associations are typically reserved for condominiums and townhomes, but today many single-family developments have them too. If this is the case, the association will need to be approved by the VA before you can use your VA financing to buy a home there.
Condos and Townhomes
Just as we spoke about above, the association can be the issue for the purchase of a condo or townhome. With a condo or townhome, you most definitely have an association and the VA must approve it.
If you are lucky enough, the association will already have VA approval. If the development has been around for a while and the association is run well, it may already be approved. If it has been around and it isn’t already approved, it’s not a good sign for you. In fact, you’ll probably want to look elsewhere as there’s likely an issue with the association that the VA doesn’t like.
If the association is approved, then you can buy a condo or townhome with your VA benefit. Of course, the unit itself must be in good condition and pass the VA appraisal process, but it’s nothing much different than any other appraisal process would require.
Contrary to popular belief, you may be able to buy a mobile home with VA financing. The trick is finding a willing lender. The VA themselves do allow the purchase of a mobile home with VA financing, but many lenders don’t want to take the risk. In order to get VA financing on a mobile home it must:
- Be a permanent part of the foundation (you shouldn’t be able to drive it away)
- Be large enough to accommodate your family size
- Have designated eating, sleeping, and grooming quarters of the home
The home, just like any other home, must pass the VA appraisal process. In other words, it must be safe, sound, and sanitary. It must also be worth at least the amount that you bid on it.
New Construction Homes
Do you plan to build your own home and want VA financing to do so? Again, the VA may allow it, but most lenders won’t. because the VA doesn’t fund the loans, it’s up to each lender what loans they want to allow.
New construction loans mean that the lender gives you money to build a home from scratch. There’s no collateral for the lender during the first phase of the loan. What happens if your builder walks away from the project and takes your money with him? Now you have a half built home and nowhere to live. Of course, you will likely walk away from it too, cutting your losses. This leaves the lender with a major default on their hands and no collateral to turn around and sell.
More commonly, VA lenders allow you to refinance your construction (temporary) financing into a VA loan once the home is built. This way the lender sees the collateral and knows that it’s worth at least as much as they lend you.
The easiest type of property to buy with VA financing is the single-family home. If you have other types of properties in mind, you may have to shop around for the right lender. Some VA lenders strictly deal with single-family properties while others will allow condos, townhomes, mobile homes, or new construction homes. As is the case with any loan, make sure that you shop around to look for the deal that is the best for you now and in the long run.