source:
  type: guide
  id: va-m26-7-ch03-t02
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 2 — Eligible
    Loan Purposes
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 2 — Eligible
    Loan Purposes.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch03-t02-full
  canonical_id: va-m26-7-ch03-t02-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 2 — Eligible Loan
    Purposes
  type: do
  tags:
  - regulator-direct
  - va
  - va-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 2 — Eligible
      Loan Purposes
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 73e5d344e2743889
    fetched_at: '2026-05-23T01:53:52Z'
    content_hash: sha256:b452379ce6dbdb528896ce1d9ac9ca8a9cf03b5fab6fa9af7766dc2dc17c2bbe
    paragraph_quote: '2. Eligible Loan Purposes Change Date November 8, 2012, Change
      21 • This section has been updated to make minor grammatical edits. • Subsection
      a has been updated to remove information on cooperative units. a. List of Eligible
      Loan Purposes The law authorizes VA to guarantee loans made to eligible veterans
      only for the following purposes: • To purchase or construct a residence, including
      a condominium unit to be owned and occupied by the veteran as a home: − the
      loan may include simultaneous purchase of the land on which the residence is
      situated or will be situated, − loans may also be guaranteed for the construction
      of a residence on land already owned by the veteran (a portion of the loan may
      be used to refinance a purchase money mortgage or sales contract for the purchase
      of the land, subject to reasonable value requirements), and − the residential
      property may not consist of more than four family units and one business unit
      except in the case of certain joint loans. (See section 1 of chapter 7 for this
      exception.) • To refinance an existing VA-guaranteed or direct loan for the
      purpose of a lower interest rate. • To refinance an existing mortgage loan or
      other indebtedness secured by a lien of record on a residence owned and occupied
      by the veteran as a home. • To repair, alter, or improve a residence owned by
      the veteran and occupied as a home. • To simultaneously purchase and improve
      a home. • To improve a residence owned and occupied by the veteran as the veteran’s
      home through the installation of a solar heating system, a solar heating and
      cooling system, or a combined solar heating and cooling system, or through the
      application of a residential energy conservation measure. These energy efficiency
      improvement loans can be made in conjunction with any type of VA purchase or
      refinancing loan. • To purchase a one-family residential unit in a condominium
      housing development approved by VA. • To purchase a farm residence to be owned
      and occupied by the veteran as a home. If the loan includes the purchase of
      farmland, the farmland is appraised at its residential value only. (See section
      12 of chapter 11). Continued on next page VA Pamphlet 26-7, Revised Chapter
      3: The VA Loan and Guaranty 3-6 2. Eligible Loan Purposes, Continued b. Ineligible
      Loan Purposes VA cannot guarantee loans made for ineligible loan purposes. Examples
      of ineligible loan purposes include: • Purchase of unimproved land with the
      intent to improve it at some future date (that is, the land purchase is not
      in conjunction with a construction loan). • Purchase or construction of a dwelling
      for investment purposes. • Purchase or construction of a combined residential
      and business property, unless, − the property is primarily for residential purposes,
      − there is not more than one business unit, and − the nonresidential area does
      not exceed 25 percent of the total floor area. • Purchase of more than one separate
      residential unit or lot unless the veteran will occupy one unit and there is
      evidence that: − the residential units are unavailable separately, − the residential
      units have a common owner, − the residential units have been treated as one
      unit in the past, and − the residential units are assessed as one unit, or −
      partition is not practical, as when one unit serves the other(s) in some respect;
      for example, common approaches or driveways. c. Cash to Veteran Generally Not
      an Eligible Loan Purpose Cash to the veteran from loan proceeds is permissible
      only for certain types of refinancing loans and under very limited circumstances,
      as follows: • For IRRRLs, see section 1 of chapter 6. • For cash-out refinancing
      loans, see section 3 of chapter 6. For other types of refinancing loans and
      all purchase/acquisition loans, the veteran generally cannot receive cash from
      loan proceeds. The only exception is the refund of items for which the veteran
      paid cash, which were subsequently included in the loan amount. Example: Earnest
      money can be refunded to the veteran on a no- downpayment loan. VA Pamphlet
      26-7, Revised Chapter 3: The VA Loan and Guaranty 3-7'
  judgment: false
