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 down payment loan.