VA Loan Occupancy Rules: Deployment, PCS and Renting Your Home Later

The basic rule

When you get a VA purchase loan, you sign a promise that you intend to live in the home as your primary residence. This is called the occupancy requirement. A VA loan cannot be used to buy a vacation home or a property you only plan to rent.

When you must move in

VA expects you to move in within a reasonable time after closing. In practice, that usually means about 60 days. Lenders may allow more time in certain cases, such as:

• You are buying a home to retire into and your retirement date is coming up
• Repairs or upgrades must be finished first
• You are stationed elsewhere and have orders to the area

Talk to your lender before closing if you know you will need more time. Being honest about your plans is important, because occupancy fraud is a serious problem.

If you are deployed or on orders

Active-duty service members can meet the occupancy rule through their spouse. If you are deployed or on orders that keep you away, your spouse can move in and live there. In some cases, a dependent child living in the home can meet the rule for an active-duty member. Ask your lender which documents it needs.

After a PCS move

Military life means moving. Once you have lived in the home, VA does not require you to stay forever. If you get PCS orders, you can:

• Keep the home as a rental and keep your VA loan in place
• Sell and restore your entitlement
• Use remaining entitlement to buy your next home with a second VA loan

Your loan servicer does not need to approve you moving out. Just keep paying the mortgage and update your insurance to a landlord policy.

Converting to a rental

Turning your old home into a rental is common. Keep these in mind:

• Insurance: switch to a landlord policy.
• Taxes: rental income is taxable, and you may get deductions. Talk to a tax pro.
• HOA rules: some condos and communities limit rentals.
• Refinancing later: you can still use an IRRRL to lower the rate, because the IRRRL only asks that you lived there before. A cash-out refinance requires that you live there now.

Multi-unit homes

If you buy a 2 to 4 unit home, you must live in one unit. The others can be rented from day one.

Step by step: staying on the right side of occupancy

1. Plan to move in within about 60 days. Tell your lender up front if you need more time.
2. If deployed, confirm your spouse can occupy and gather any required documents.
3. Keep proof you moved in, such as utility bills and a change of address.
4. When orders come, decide whether to rent, sell or keep it vacant.
5. Update insurance and set aside money for repairs between tenants.
6. Track your entitlement if you plan to buy again.

What not to do

Do not tell a lender you will live in a home you really plan to rent. That is mortgage fraud and can lead to serious penalties. The honest path, buying a home you live in and renting it later, is fully allowed.

Bottom line

VA occupancy rules are built for military life. Move in when you buy, use your spouse if you are deployed, and know that you can keep the home as a rental when you move on.