I'm wondering what will the possible penalty to be if the property we purchased not as our primary residence by using VA or FHA loan after lender found out?

He should have been able to find at least 80% LTV.  80% LTV is still a norm on purchase, but it's about what can make the numbers work which many times these days constrains LTV. 

Are you looking to purchase (and fix) the 2nd home?

Depending on the lender for a DSCR rental property loan, rates will be about 0.125% to .25% lower if you put 25% versus 20% down on an investment property purchase if it's the same borrower credit score and profile being analyzed. 

Your offer to purchase should include a requirement that the Seller provide all documentation and agree to sign an estoppel certificate (also called an estoppel form or agreement).

The rate sounds low..conventional mortgage primary purchases are in the high 6%'s-low 7%'s..The 5 year PPP is a little heavy as usually declining..5%.4%.3%..can also consider 'buying out' of the PPP usually around 1-1.5% of the loan amount upfront..

The primary purpose is to assist eligible veterans in purchasing, building, repairing, retaining, or adapting a home for personal occupancy.Asset Protection Strategies: If your goal is to protect your assets, there are other strategies you might consider:Insurance: Obtaining adequate insurance coverage, like homeowner's insurance and umbrella policies (as @Greg Scott mentioned), can provide a layer of protection against liabilities.Homestead Exemption: Some states offer a homestead exemption that can protect a portion of your home's value from creditors.Trusts: In some cases, placing the property in a trust can provide asset protection, although this can be complex and requires legal expertise.Legal and Financial Advice: It's crucial to seek advice from legal and financial experts.

I am also interested in purchasing another property that is ready to go with minimal repairs needed to start getting some passive rental income.

Welcome to BP and congrats on your upcoming purchase!

Here is the scenario.The current property purchase price is $250k, promissory note is $450k, let's say the property sells at $1M.