Using A Va Loan For Investments
The same approaches can be used to purchase a second home using a VA loan and then use the first home as an investment property. The buyer has to occupy the second home, meeting the various legal requirements, but the first home can then be rented out for investment income.
Another way to use VA loan benefits to buy investment property is to purchase a multi-unit residential property. The buyer can live in one unit, satisfying the occupancy requirement, and rent the other units to tenants.
There is room for some interpretation of how these rules apply to a veterans plans and the requirements for occupancy. To be sure a VA loan can be used in a particular circumstance, its a good idea to check with the regional VA office and discuss the situation.
Va Loan Eligibility Requirements:
Contrary to popular belief, VA loans are available not only to veterans, but also other classes of military personnel. The list of eligible VA borrowers includes active-duty service persons, members of the National Guard, Reservists, surviving spouses of veterans, cadets at the U.S. Military, Air Force or Coast Guard Academy, midshipmen at the U.S. Naval Academy, and officers at the National Oceanic & Atmospheric Administration. A minimum term of service is typically required.
Both active duty and retired military are eligible for a VA loan after a set period of time, based on their service period. For example, Gulf War vets are required to serve at least 90 days of active duty or to fully complete the term they were ordered to active duty for without a dishonorable discharge. That group includes vets that were in service from August 2, 1990 until the present.
The loans are available to military personnel that are currently serving, those who have been discharged, and those who have retired. Your eligibility for a VA loan is determined by the length of service and character of your service. In general, the following criteria qualifies you for a VA loan:
In addition, there are these requirements:
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The home must be your primary residence
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You must have a valid certificate of eligibility from the VA
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Although the VA has no minimum credit score requirement, most lenders do
Apply For Your Loan And Follow The Lenders Directions
To speed your loan application process along, make sure you have copies of your W-2 forms and recent pay stubs nearby before you begin. Itll also help to have your most recent mortgage statement available.
Your lender will order a new appraisal to find the current market value of your home.
Your loan officer should be available to help guide you through the application process. If the lender asks for additional documents, provide them as quickly as you can to avoid delays.
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Va Home Loan Overview And Advantages
What we know now as the VA home loan actually began with the 1944 Servicemens Readjustment Act. Among other benefits , this bill established the predecessor to the current VA home loan, increasing veteran homeownership via access to affordable mortgages.
Currently, the VA home loan offers the following key benefits, all of which make using the program a second time extremely appealing:
- No down payment required
- Streamlined refinance via the Interest Rate Reduction Refinance Loan
Second Va Loan Impact On Funding Fees
The funding fee is an inescapable expense on VA loans, and you could wind up paying more for it on your second loan. If you make a down payment less than 5 percent of the purchase price the second time you take out a VA loan , the funding fee will be 3.6 percent. If you can make a down payment of more than 5 percent or more than 10 percent, though, the funding fee comes down to more affordable levels of 1.65 percent and 1.4 percent, respectively.
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For Borrowers Who Have Never Used A Va Loan Before
Those who have never used their VA mortgage loan benefits before but own property from a different type of mortgage loan transaction should know that the main issue with a potential VA mortgage in these circumstances is the intent to occupy.
A borrower who has never used VA loan entitlement has the full amount of their VA mortgage available to use, but not for non-residential properties, commercial enterprises featuring transient occupancy or short-term rentals fewer than 30 days. The house you buy or build with a VA mortgage must be your primary residence within 60 days of closing in most cases.
The occupancy issue applies no matter what kind of circumstance you find yourself in with a VA loan to purchase propertyyou cant buy a house you dont intend to live in as your main home. That does not mean you cant buy a multi-unit property and rent out the unused units, but the borrowers obligated on the mortgage are required to use the house they buy with a VA mortgage as their home.
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So How Many Times Can You Use A Va Loan
Eligible veterans and military service members are able to use there VA home loan benefits over and over again. There is no limit on how many times you can use your VA loan benefit. This is a benefit you have earned for serving our country, and once you have earned it, it is a life long benefit you can use over and over again. You can restore your entitlement as often as you need as long as you sell the previous property and pay the prior loan in full. In some cases you can even keep your first home and buy a second primary residence if you are required to move for a job or a PCS situation. Everyones circumstances are unique, so give one of our VA home loan specialists a call at 855-956-4040 to find out more. We are here to serve you!
How Much Entitlement Does The Va Provide
Entitlement can be confusing for even the most experienced mortgage professionals. But it really just involves a bit of math. In most areas of the country, basic entitlement is $36,000. Additionally, secondary entitlement is $70,025. Adding those together gives you a total of $106,024 for eligible veterans. In higher cost areas, it may be even more.Additionally, the VA insures a quarter of the loan amount for loans over $144,000. Therefore, you can multiply that entitlement amount, $106,024, by four for a maximum loan amount of $424,100. Thats the total amount qualified buyers could borrow before having to factor in a down payment.
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How Many Va Loans Can You Have
So long as you have remaining entitlement , access to a VA loan is a lifelong benefit. There are different scenarios that typically involve an additional VA loan:
There are several ways you can capitalize on a VA loan more than once. If you sell your current home, you can restore your VA entitlement to purchase your next home.
You dont always have to sell your house or move to take advantage of another VA loan, though. You can refinance into a new VA loan to lower your interest rate and monthly payment, which can be done with a VA streamline refinance, also known as a VA IRRRL. Another option is a VA cash-out refinance loan, which involves more paperwork but can help you tap your home equity.
The third way is to carry two VA loans for two different homes at the same time. This is possible it often happens when an active service member receives Permanent Change of Station orders but its important to remember that a VA lender will need to approve you having multiple loans. Essentially, youll need to show that you have the means to pay both of the loans back at the same time.
What Is A Va Loan And Who Is Eligible
With the purpose of helping service members finance a home with favorable loan terms, a is a mortgage loan thats guaranteed by the U.S. Department of Veteran Affairs . The main perks of a VA loan is that zero down payment is required, and there is noprivate mortgage insurance).To qualify for a VA loan, you must have a valid Certificate of Eligibility , and you must meet certain income and credit requirements. Length of service, conduct, and duty status can also affect your eligibility.
You may be able to obtain a COE if you belong to any of the following categories: veteran, active duty service member, National Guard member, reserve member, or surviving spouse.
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Do Va Loans Have A Down Payment
Generally speaking, VA loans do not require a down payment since the VA itself guarantees the loans. Although a borrower can decide to put some money down when purchasing a home, many dont. Almost 90% of all VA loans are issued without a down payment.
With conventional mortgages, the recommended down payment is usually 20%. While its possible to get a conventional loan with less money down, borrowers who put down less typically have to pay private mortgage insurance and higher interest rates. Thats not the case with a VA loan.
How To Refinance A Va Loan And Keep A Second Mortgage
Refinancing with a VA loan may be a good option if youre looking to lower your monthly mortgage payments, take advantage of lower interest rates or use some of your home equity to cover various expenses.
The VA Streamline refinance, also called the Interest Rate Reduction Refinance Loan , is an option for homeowners who have an existing VA home loan and are looking to lower their interest rate.
A VA cash-out refinance is also available to veteran homeowners who are interested in taking cash out of their homes equity. This money could be needed for emergency expenses, home improvements, bills and so on. You may be eligible for other VA loan refinancing options. Talk to your mortgage lender to see which option you qualify for.
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Va Loan After Va Foreclosure
The last important piece to mention is how foreclosure affects second-tier entitlement. Having a VA loan foreclosed on doesn’t mean you’ve lost the ability to get another VA loan. You may be able to secure a new VA loan after just two years.
Following a foreclosure or short sale, the most significant consideration is often how much house you can buy before needing to factor in a down payment.
How Big Of A Va Loan Can Veterans & Military Personnel Get
According to the VA there is no maximum that an eligible veteran may borrow using a VA-guaranteed loan. However, there are county limits that must be used to calculate the VAs maximum guaranty amount for a particular county. In other words, theres no limit to how much you can spend on your new home with a VA loan, but the VA has limits on how much liability it will assume, which can affect the amount of money your lender will let you borrow.
Generally, eligible veterans or military personnel can get loans up to $417,000 with no money down. But that number can be much higher in certain counties that have a higher cost of living. Ask your lender about county limits for VA loans.
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Va Home Loan Disadvantages
Although theres a lot to love about VA home loans, they also come with a strict set of rules. If you owe back taxes or other federal liens, or if you are looking to buy a condominium, another type of loan may suit your needs better.
- Zero flexibility for defaults or federal debts: If you are behind on tax payments or student loans, you may not qualify for a VA home loan. To get a VA-guaranteed loan, you must have all your federal debt resolved.
- VA loans require an upfront funding fee: In addition to closing costs, VA home loan recipients must also pay a one-time funding fee in place of PMI. The fees can be included in the loan or paid during closing.
- Condos may not be VA approved: Not all condominiums are VA-approved. If you are considering purchasing a condo instead of a traditional home, you will have to make sure it meets the VA home loan program requirements.
- VA loans require clear termite reports: In most of the United States, your future home will need a termite inspection before purchase. This fee cant be rolled into the loan and must be paid by either the buyer or seller.
Drawbacks Of The Va Loan
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Providing Certificate of Eligibility. This is really more of a minor inconvenience, but you still have to do it. Youll need a Certificate of Eligibility to show how much of a benefit you qualify for. Often, your lender can get this for you, but you may have to contact the VA directly. Do it before you apply because it can take a while.
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May be subject to lender overlays. Although the VA just wants to give you a loan, some of the lenders it insures are less free with their money. They may impose additional rules on top of the very flexible rules of the VA. It might make financial sense to shop this loan around a bit.
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Subject to upper loan limits. For many vets, the upper loan limit of $453,100 in most areas will be far more house than they intend to purchase. Still, if youre in an area where prices are rising faster than the VAs formulary, it could be an important factor to keep in mind.
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How To Take Out A Second Va Loan
You can use a VA loan to purchase a new home or refinance your old mortgage. If you paid off a previous loan on a property you still own or have sold, youll need to complete and submit a Request for Certificate of Eligibility . If you still own the home, you can only have your full eligibility restored once.
Youll need to include proof the VA loan is paid off. You should also include proof the home was sold if it was to expedite the process. Once your eligibility is restored, youll need to bring the COE to the VA loan lenders youre considering.
Do You Need Mortgage Insurance For A Va Loan
Some lenders require a borrower to take out private mortgage insurance in certain situations, such as a conventional loan when a person puts down less than 20% or an FHA loan. PMI protects the lender, as it backs the loan and will cover payments if a borrower defaults.
When a person puts down a smaller down payment, the lender considers them a riskier borrower. PMI helps to mitigate that risk. In the case of a conventional loan, PMI is no longer required once a person has made enough payments to build up 20% equity in their home. FHA insurance payments are for the life of the loan.
There are no VA loan PMI requirements, fortunately. Even with zero percent down, a VA loan borrower can skip the PMI because the VA is essentially acting as mortgage insurance.
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Can I Get A Second Va Loan
Many homeowners who have used a VA loan before wonder if they can use the program again. After all, with its many benefits, the VA loan is often the best mortgage option available.
There are many myths and rumors surrounding VA loans, some of which deal with your eligibility for the program after youve already had a VA loan.
Here are some of the questions regarding VA loan eligibility after already using the loan program.
Prepare To Close On The New Loan
It can take almost two months to close on a VA cash-out loan. Your lender will schedule a closing date, and it should take care of most of the little details.
But youll still have some decisions to make and a lot of papers to sign. For example, will you pay the VA funding fee out of pocket or finance it into your loan? There will be some other closing costs to cover as you transition from your old loan to the new one.
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