Types of Properties You Can and Cannot Buy With a VA Loan

The VA loan program offers a number of benefits to veterans, active-duty service members, and their families. It provides 100% financing for a home purchase, competitive interest rates, and flexible qualification criteria. 

While VA loans offer a lot of flexibility, there are some restrictions on the types of properties eligible for financing. In this guide, we’ll review the properties you can buy with a VA loan and the ones that are not eligible for funding. 

What You Can Buy With a VA Loan

The VA loan program allows you to purchase a wide range of property types but is generally limited to primary residences. 

You can use a VA loan to buy the following kinds of properties: 

Traditional single-family detached homes 

Veterans and eligible service members can obtain VA-guaranteed loans to purchase single-family homes, including stand-alone houses, townhouses, and condominiums approved by the VA.  

This flexibility allows buyers to choose the type of residence most appropriate for their lives and needs and also will enable them to benefit from the VA loan terms and rates.  

Whether looking for a traditional house in a suburban neighborhood or a more compact urban dwelling, the VA loan program is an excellent way for veterans to ease into the homeownership process with simplicity. 

Condominium units, as long as they’re VA-approved 

Contrary to the impression that all condominiums can be financed via the VA, only those approved by the VA as part of the VA-approved project can. The approval of the condominium community ensures that it meets specific criteria set by the VA, including financial stability, adherence to homeowner association rules, and other factors believed to be necessary by the VA.  

Veterans who want to experience the convenience and amenities that condominium living offers can apply for a VA loan if the unit is part of a project that has been approved by the VA. Through this option, veterans can broaden their housing choices, enabling them to enjoy the amenities of condominium development and the excellent conditions associated with VA financing programs. 

Manufactured homes that meet specific guidelines 

These VA loans can cover the purchase of manufactured homes if the properties adhere to the comprehensive specifications. However, these conditions also list the VA loan inspection requirements, such as affixing the home to the permanent foundation and passing the VA appraisal requirements.  

Manufactured housing is a more affordable choice for the veterans, ensuring they are at par with other homeowners with lower initial costs. Using VA loans available to manufactured homes, veterans will get houses that match their needs and tastes, and they will benefit from the advantages of loans offered to the military.  

Through this approach, veterans can get even more chances to become homeowners, having access to quality homes. 

New construction homes 

Veterans can use VA loans to obtain sound financial terms when constructing homes, which contain all the preferences and specifications of their choice. This is because it is designed to give veterans flexibility and the ability to tailor their own homes to satisfy their specific needs and what they want to live with.  

On the other hand, your system should have the approval of the VA, and the building regulations and rules must be in compliance at all stages of the construction project. Through VA construction loans, veterans can become proud homeowners who can accomplish their dream of a home that reflects their vision and ambitions for the future by acquiring the resources needed. 

Multi-unit properties like duplexes and triplexes, if the borrower resides in one of the units 

Providing an opportunity for VA loans is not only limited to individual home dwellings but also relates to multiple-family properties with various units such as duplexes, triplexes, and fourplexes. Veterans can acquire these properties with the initial aim of living in one of the units themselves while renting out the rest of the units to bring in rental income.  

This one-of-a-kind advantage often draws investors towards VA mortgages for portfolio diversification and availing VA loan financing benefits. Utilizing VA funding fee in mixed-unit properties enables veterans to create wealth through real estate investments, and they will have guaranteed affordable housing for themselves and their families. 

As you can see, VA loans offer plenty of flexibility when it comes to property choices. This program allows veterans and service members to purchase a type of home that meets their needs, preferences, and long-term financial goals. 

Types of Properties Not Eligible for Financing

Despite the program’s flexibility and forgiving qualification criteria, there are certain types of properties you cannot buy with a VA loan. Anything that deviates from the typical residential housing options mentioned above is likely outside the bounds of VA financing. 

Here are some of the property types you cannot buy with a VA loan: 

1. Vacation Homes and Investment Properties 

As mentioned above, the VA loan program’s primary purpose is to help eligible military members and veterans purchase a home to serve as their primary residence. 

As a result, VA loan for second home that purely serve as vacation or investment properties typically don’t qualify for financing. 

The Department of Veterans Affairs issues a publication called VA Pamphlet 26-7. It serves as the official handbook for mortgage lenders that participate in this loan program. 

According to that handbook, federal law allows the Department of Veterans Affairs to guarantee loans used to “purchase or construct a residence, including a condominium unit to be owned and occupied by the veteran as a home.” 

Elsewhere, the handbook states: 

“Use of the property as a seasonal vacation home does not satisfy the occupancy requirement [for a VA loan].” 

In other words, you can only use a VA loan to buy a property you intend to live in as your primary residence. Vacation homes need not apply. 

2. Undeveloped Land

You can use VA land loans to build a home on land that you own or to buy land that you plan to build on immediately. However, you need help to use the program to purchase vacant land. 

Here’s another way to think of it: 

If you’re buying undeveloped land solely as an investment, perhaps to sell it again in the future, the VA loan program is not the proper financing method. But if you want to purchase land to immediately construct a home that will serve as your primary residence, you could probably do it with a VA loan. 

3. Non-Residential / Commercial Properties 

The VA home loan program is designed to help veterans and military members purchase a property for residential use. Businesses, storefronts, and other commercial structures are generally not eligible for a VA loan—even if they have a small living space attached. 

As stated in the official handbook, “A property that is primarily non-residential is ineligible for VA loan guaranty.” 

On the other hand, if a property primarily serves as a residence but has an office area designed for business purposes, it might qualify for a VA loan. However, if most of the property is commercial and only a tiny area serves as a residence, it won’t meet the VA’s requirement. 

4. Properties in Serious Disrepair (Fixer-Uppers) 

When you buy a home with a VA-guaranteed mortgage loan, it will have to be appraised prior to closing. The appraiser will determine the home’s current market value and also check to see if it meets the VA Minimum Property Requirements (MPRs). 

The MPRs help to ensure that the home is safe, structurally sound, and sanitary for occupancy. In short, the property must be move-in ready without an immediate need for extensive repairs or renovations. 

Because of this requirement, “fixer-upper” properties that need a lot of work just to be livable are typically not eligible for financing under VA loan property requirements. 

5. Cooperatives (Co-ops)

A housing cooperative, or co-op, is a democratically controlled corporation established to provide housing for its members. A portion of the corporation is owned by every household. As such, this type of property cannot be financed with a VA loan. 

Co-ops differ from traditional homeownership as they are technically shares in a corporation that owns the building. So, it’s not the same as buying a house that you will eventually own for yourself. VA loans are not compatible with this structure. 

6. Properties Outside the U.S. and Its Territories 

VA loans are intended for properties located within the United States and its territories (Puerto Rico, Guam, the Virgin Islands, American Samoa, and the Northern Mariana Islands). 

Conclusion: The VA loan program offers a number of benefits, including the ability to buy a home with no down payment. However, you can only buy particular types of properties when using a VA-backed mortgage. Generally, this program is limited to detached homes, condos, townhomes, and certain types of multifamily properties.