Can I Have 2 Va Mortgages
Contrary to popular belief, it is possible to have two VA mortgages at the same time. That said, it only applies under specific circumstances.
You can have two VA mortgages as long as you can still meet the occupancy requirement for VA loans. In other words, youll need two primary residences. This typically applies if you purchase one home with a VA loan, and then youre permanently restationed to a different location.
Its also important to note that theres no limit to the number of times you can use the VA loan benefit during your lifetime. This means you could purchase a home with a VA loan, sell it later on and get another VA loan for your next home. Just remember, even with investment properties, you have to occupy the home to qualify for a VA mortgage.
Types Of Va Home Loans
A VA loan can be used to purchase an existing home, build a new home, improve a home, or refinance an existing home loan. There are two types of loan programs from the VA:
- VA direct home loan where the Veterans Administration serves as the mortgage lender. Borrowers work directly with the VA, and loan terms and conditions may be better than those offered by conventional lenders such as a bank, credit union, or mortgage company.
- VA-backed home loans are partially guaranteed by the Veterans Administration and obtained from a conventional lender. Although a borrower will need to meet a lenders credit and income requirements, lenders generally see less risk in a VA loan and a borrower is more likely to receive better loan terms. According to the Veterans Administration, nearly 90% of all VA-backed loans are made without a down payment, even though the loan is originated by a conventional lender.
Home Loan: Liability Or Asset
Heres a key point when qualifying for loans: A home loan is considered a liability. You must be able to pay for all of your liabilities when seeking a new home loan. But if the home is rented and the income is more than the mortgage payment, its no longer considered a liability! The rental income contributes to your debt-to-income ratio. You dont need additional military/job income to qualify for a new loan. Therefore, you must prepare to qualify for a home loan by finding renters before qualifying for a loan. In nearly every home Ive lived in, I prepared the home to be rented and had renters in place or contracted before I applied for my next loan. This made qualifying a snap! After all, I was in the military, and I knew a move would be coming soon. So it was best to get the house ready to be rented and prepare my finances for the next loan.
It also goes without saying that military life is very hard on families. Divorce is an unfortunate reality for military members, and they often must pay child support or alimony while they defend the country we all love. Little money remains for savings, growth, or retirement. I was in this position! After 15 years of service, I had no savings or 401k, but instead, I had tenants paying my mortgages. To my surprise, my net worth and responsibility quickly surpassed those of the of my military coworkers and commanders.
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Calculate Remaining Va Loan Entitlement
Lets use my situation to calculate how much more money I can borrow no money down from the VA. Im going to adjust my numbers a little to make the math easier to follow.
I own one property with a VA loan. It is my current primary residence. The loan amount is seen on my certificate of eligibility and is $400,000.
I want to buy another property in Montgomery, Alabama. The loan limit in this city in 2022 is $650,000.
Lets subtract:
$650,000New loan limit minus $400,000Prior loan amount
equals $250,000remaining borrowing power.
This is the amount I can borrow without needing a downpayment.
What if I wanted to buy a house that cost more than that?
For VA loans, the lender wants a 25% downpayment for the amount of the loan exceeding the loan limit.
Weve determined that I have $250,000 remaining in borrowing power by subtracting my prior loan amount from the loan limit.
$650,000 $400,000 = $250,000
For every dollar over $250,000, I need to contribute 25 cents as a downpayment.
If I want a loan for $350,000, but I only have $250,000 left in no-money-down borrowing power, then Im $100,000 over the loan limit.
I dont need to come up with the entire $100k. I need to come up with 25% of that.
$100,000 X .25 = $25,000
So on a $350,000 loan, my downpayment is only $25,000, because the VA is still guaranteeing $250k , and Im only making a downpayment on the remaining $100k.
I have no idea if I did a good job explaining that.
Buying With Bad Credit
You dont need top credit scores to get a mortgage loan for an investment property. A better score will get you more favorable rates, but you can get approved for a mortgage with a credit score of 630 or better.
If your score doesnt reach those levels, you should look into hard money lenders and real estate syndicates for investment money. Just know that these loans will come with higher interest rates.
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Renting Your Home After A Va Purchase
Lets say you bought a VA-financed home in San Diego but will be spending the next three years at Pearl Harbor, Hawaii.
If youve already lived in your San Diego home as a primary residence for a year, you could rent it out while also using another VA loan to buy a new home in Hawaii. If you havent lived in the San Diego home for a year, you could ask the VA for an exception to its occupancy rule.
However, the VA can limit the size of your second home loan. VA loan limits no longer apply to first-time VA borrowers, but they can apply if youre already using your VA loan benefit.
And, keep in mind that, regardless of the VAs loan limits, your lender will limit your loan amount based on your credit score, other debts, and personal finance details.
Can I Use My Va Loan To Buy Investment Property
So, yes, it is possible to use your VA loan for rental property, bearing one of the units is your primary residence. However, a VA mortgage cannot be used to buy property or land solely as an investment or rental property. see details
Yes, it is possible to get a VA loan for $1 million or more, but only if you qualify for the loan with your lender. The VA no longer caps loan sizes for VA-eligible borrowers with full entitlement. view details
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How To Compare Lenders
Things to consider when you compare lenders are the annual percentage rate , terms, closing costs, and speed of funding. With investment properties, sometimes the speed of funding can be the most important factor.
Your particular goals will play an important role when you compare lenders. For example, if a quick flip is your goal, a higher interest rate might not matter as much for a loan that funds in 48 hours. On the other hand, if youre investing in a rental property, the total cost of borrowing money is crucial because it will eat into your long-term profits. To research investment property mortgage lenders, find the best mortgage companies here.
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What Is A Va Loan And How Does It Work
First, letâs look at what a VA loan is and how it works.
VA loans are a government secured mortgage that is available to current US military service members and veterans.
The VA loan is best known for having no down payment required.
They are a part of the Veteranâs Affairs benefits with the goal of helping borrowers to enter into homeownership without significant costs. VA loans are available through private lenders and backed by the federal government.
Today, thanks to the Blue Water Navy Vietnam Veterans Act of 2019, more military service members and veterans are using their VA home loan benefits than in years past.
This new legislation removed loan limits on VA loans, making them more accessible to borrowers in pricey areas throughout the country. Prior to this legislation passing, borrowers with real estate loans exceeding the local VA loan limit would have to make a downpayment to cover the difference.
The removal of loan limits has created a large uptick in new VA loans.
In 2020, there were over 1.2 million new VA home loans, which is higher than the previous two fiscal years combined.
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Va Home Loan Investment Strategy : Doubling Up
Most veterans dont realize it, but you can use the VA loan twice, that is, you can have two VA loans outstanding on two properties at the same time. This reality creates an opportunity for veterans to indirectly buy a rental property with a VA loan. However, to understand this investment strategy, we need to provide some background on VA loan entitlement.
The Department of Veterans Affairs guarantees 25% of VA loans not 100%. And, the VA currently guarantees up to $127,600 annually adjusted, and B) larger in some higher cost of living areas). This means that, without needing a down payment, eligible veterans can borrow up to $510,400 .
But, what if your first home costs less than$510,400? Heres where this investment strategy begins.
When a veteran uses the VA loan, a portion of his or her entitlement becomes tied up in the mortgage. So, if a veteran purchases a $200,000 home, $50,000 of entitlement is committed . But, as discussed, total entitlement is $127,600 . In this scenario:
- Total guaranteed entitlement: $127,600
- Minus 1st loan entitlement: -$50,000
- Equals remaining entitlement: $77,600
In this scenario, $77,600 x 4 = $310,400, which means that this veteran could use the VA loan a second time to purchase a $310,400 home without a down payment, leading to the following real estate investing strategy:
Purchase Two Homes With A Va Loan
VA loans can be used to buy two homes at once, which is beneficial for military members who can be flexible with their accommodations and savvy with their knowledge of VA loan entitlements.
VA loan entitlement refers to the amount of the loan that is insured by the Department of Veteran Affairs. The VA guarantees 25% of the loan or up to $161,800, whichever comes first.
Therefore, a veteran can borrow up to $647,200 without providing a down payment. If the home costs less than this amount, they can use the remaining entitlement for another VA-backed home loan.
When planning to take out an additional VA loan with leftover entitlement, its important to buy a less expensive property first.
Heres why: imagine a military member wants to buy a primary home and a rental investment using VA loans. Occupancy requirements dictate that the borrower must live in the home for at least a year before renting it out.
Therefore, the borrower could buy a property for $272,300. That means their remaining entitlement would be $144,781.25. After one year, they could start renting out the first property and can use the rollover entitlement to purchase a home that costs up to $579,125 without a down payment.
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Benefits Of Va Home Loans
VA loans allow qualified borrowers to put no money down toward the purchase of a home. That flexibility could come in quite handy if you have the income to support ongoing mortgage payments but don’t have enough money in savings to come up with a down payment. Additionally, if you have generous friends or relatives, you can use a down payment gift to cover your down payment.
Also, VA loans don’t charge private mortgage insurance, or PMI, which is a penalty of sorts that buyers face when they can’t make a 20% down payment on a home. PMI generally gets tacked on as an added premium to your monthly mortgage, making it more expensive.
VA loans are also easier to qualify for than traditional mortgage loans, since they’re backed by a government agency. As such, lenders take on less risk and are therefore more lenient with their borrowing requirements.
Finally, VA loans tend to offer competitive interest rates. The exact rate you qualify for, however, will depend on factors like your loan amount and your .
Va Loans: 5 Things To Know About Renting Out Your Home
It is possible to rent out your VA-financed home while simultaneously buying a second home through the VA home loan program. But there are limits to know about, such as loan limits and the occupancy rules weve already discussed.
Here are five things to know if youre thinking about renting out your VA loan-financed home.
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Who Can Get A Va Loan
Well as one would think a Veteran can get a VA Loan. Also a veteran jointly with a spouse or another veteran.
For those of us who are not military, get this, a Veteran with a non-spouse, non-veteran, co-signer, could jointly buy a property. Not so thrilling for a single unit, but what if two friends, one a veteran and one not, pool their funds to buy a duplex, they live on one side and rent out the other for a profitable house hack?
And if two veterans get together to invest, they could potentially buy or build a 6 plex. David shares that VA Pamphlet 26-7, Revised, states that If a property is to be owned by two or more eligible veterans, it may consist of four family units and one business unit, plus one additional unit for each veteran participating in the ownership. Thus, two veterans may purchase or construct residential property consisting of up to six family units , and one business unit!
The Va Funding Fee: How Does It Factor Into Investment Properties
Even with no money down, VA loans donât charge ongoing mortgage insurance premiums. This is one of the biggest perks of VA loans when compared to USDA, FHA, and conventional loans.
However, all VA loans have a funding fee that offsets the costs of running the program and allows the VA to not charge an annual mortgage insurance fee.
The VA funding fee is charged as a percentage of your loan amount and varies based on your down payment amount and how many times youâve used the VA loan benefit.
VA FUNDING FEES FOR FIRST-TIME BORROWERS
Down paymentFunding fee0%2.30%5-9%1.65%10% or more1.40%
VA FUNDING FEES FOR SUBSEQUENT HOME LOANS
Down paymentFunding fee0%3.60%5-9%1.65%10% or more1.40%
The VA exempts some veterans with service-related disabilities from paying the funding fee. This makes VA loans an even more advantageous way for them to build wealth through real estate.
But most vets pay the fee or finance it into the loanâs amount. Paying the fee doesnât make the VA loan less of a good deal, though, especially when you consider that USDA and FHA loans require upfront and annual mortgage insurance premiums for the life of the loan.
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Requires No Money To Get Started
The number one excuse for not getting started in real estate is I dont have enough money.
This is actually one of the reasons I love real estate!
This excuse raises the barrier to entry for real estate investing and keeps a lot of the would-be competition away.
That being said, the VA loan eradicates this excuse soundly!
The VA loan allows for 100% financing. That means you dont need to pay a single penny to buy a home!
While this is great for buying a primary residence, it is also great for investors.
Imagine earning a return on your investment of $0.00 Any return is an INFINITE return because you didnt have to invest any capital!
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The Information You Need About The Funding Option
The Veteran Affairs loan will enable you to get the money you need when purchasing a house. The best thing about this financial option is that the government does not set strict qualification regulations like other mortgage lenders. Millions of military service members have successfully applied for the mortgage, enabling them to realize their dreams.
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Primary Residence With Extra Space
Although the property youre purchasing needs to be your primary residence to be eligible for a VA loan, theres a way around this stipulation.
Lets say, for example, that the borrower purchases a property with a detached apartment or they have an extra room in their single-family home. As long as the property is the borrowers primary residence, they can rent out the detached apartment or extra room and still be VA loan-eligible.
Va Loans For Rental Property And Primary Residences
Stringing together VA loans to build a portfolio of single-family homes will take some time for most veterans. Most homebuyers donât have the budget to pay two or three house payments at the same time.
And thereâs another drawback to this approach: Using your VA loan benefits on more than one home at a time will stretch your VA loan entitlement. If you donât have full entitlement benefit available, your next VA home purchase could be subject to VA loan limits, which cap the amount you can borrow for a home.
If you donât have remaining entitlement, youâll have to request a one-time restoration of your VA loan benefit if you pay off the existing VA loan but keep the home.
Because VA loans arenât designed for veterans to build their real estate portfolios, some veterans prefer a different strategy to use VA loans for investment property: Buying a duplex, a triplex, or a quadplex. The VA does allow you to live in one of the units to satisfy the VAâs primary residence requirement.
With this approach, you could start earning income from rental properties right away, even when you have only one VA loan.
Then, later, you could refinance out of your existing VA loan, and request a one-time restoration to buy another multifamily property. You would move into one of its units while keeping your original multifamily property earning investment income.
This approach allows you to accumulate more âdoors,â or units you own that can serve as income-generating properties.
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