Question:  My client currently rents an apartment in California.  He is also employed in California.He has never owned a home and wants to buy a house in Arizona. Can he use his VA eligibility?

Answer:  No. Your client can purchase a home in Arizona, but he cannot use his VA.   Limited down conventional loans, VA, FHA, USDA, are programs for primary residences only.

Primary residences are defined by the area in which you work.   For instance, if your client derives his income employed as school teacher in San Diego, he would be eligible to purchase a primary home within the San Diego area.

Another consideration may be to purchase the house as a “second” home.   They cannot be rented! Second home mortgages are available for as little as ten percent down, but the qualifications are tough and the monthly mortgage insurance (since it is less than 20% down) is gut-wrenching.  Qualifications could include: credit scores above 720, low debt to income ratios with the new house payment plus the current residence payment and all consumer debt.    Major bucks are required to be in the bank, for “reserves”. Twenty percent down is more typical for a second home.

FYI:  The definition of a second home is 75 miles from your current residence.

If the purpose of the purchase is to rent the home, the property would need to be obtained as an investment property.   The qualifications are the same as above but with 20% down.

Exception:  If your client’s employer states in a formal letter that it is okay for the client to live in Arizona, then he can move forward with a VA loan or any other primary residence mortgage.

But use a little wisdom. It will need to make sense that he can live in one state while working in another.

Diane Gerdes
[email protected]egerdes.com