3 VA Loan House-Hacks for the Newbie Military Investor
If there is one thing that I sincerely dislike in this world, it’s reading 100+ page government regulations. They’re poorly worded, intentionally confusing, and absolutely mind numbing to get through. However, in an effort to learn more about the VA Loan Guaranty program, I decided to bite the bullet…Call me a masochist I guess.
The Code of Federal Regulations is the codification of rules and regulations determined by different government agencies and departments (i.e. Department of Energy, or Department of Veterans Affairs etc.). The one that applies to the VA Loan program is Title 38, Part 36 – “Loan Guaranty”
I took some time this weekend to school myself on the intricacies of the VA Loan Guaranty program before I use one myself. In order to avoid boring the reader to tears, I’ve decided to break this blog down into more manageable chunks. Therefore I’ve listed just 3 of the many valuable aspects of the VA Loan program below.
**Caveat Alert** – I’m not a realtor, lawyer, or banker…I’m just a guy who read some regulations and took some notes. So please, before you take out a VA loan, check with someone to make sure that the below passages apply to your situation. Bottom Line: Different lenders treat the VA loan in different ways.
#1) VA loans don’t just have to be used on a single-family home. They can be used on condos, multi-family (up to 4) houses, and even land. To sweeten the deal, if you’ve partnered with another eligible veteran, you can add an extra unit to that!
§ 36.4301
Residential property.
(1) Any one-family residential unit in a condominium housing development within the purview of 38 U.S.C. 3710(a)(6) and §§ 36.4360 through 36.4365;
(2) Any manufactured home permanently affixed to a lot owned or being purchased by a veteran and considered to be real property under the laws of the State where it is located;
(3) Any improved real property (other than a condominium housing development or a manufactured home and/or lot) or leasehold estate therein as limited by this subpart, the primary use of which is for occupancy as a home, consisting of not more than four family units, plus an added unit for each eligible veteran if more than one participates in the ownership thereof; or
(4) Any land to be purchased out of the proceeds of a loan for the construction of a dwelling, and on which such dwelling is to be erected.
(Authority: 38 U.S.C. 3703(c)(1) and 3710(a))
#2) VA loans can be taken out for improvement of your current property.
§ 36.4301
Energy conservation improvement
An improvement to an existing dwelling or farm residence through the installation of a solar heating system, a solar heating and cooling system, or a combined solar heating and cooling system or through application of a residential energy conservation measure as prescribed in 38 U.S.C. 3710(d) or by the Secretary.
#3) VA loans can be used for combined residential and business property. Sounds like a great way to start your own brick and mortar real estate business ey?
§ 36.4357
Combination residential and business property
If otherwise eligible, a loan for the purchase or construction of a combination of residential property and business property which the veteran proposes to occupy in part as a home will be eligible under 38 U.S.C. 3710, if the property is primarily for residential purposes and no more than one business unit is included in the property.
(Authority: 38 U.S.C. 3703(c)(1))
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I hope that these nuggets of information prove useful. If you want to read up on the VA Loan yourself (instead of taking a lenders word for it) I’ve included the link to the CFR at the top.
These three house hacks are just the tip of the iceberg and I’ll be sure to post some more in the near future.
Best of luck!
Tyler Flagg
Comments (19)
Shawn Devoid, over 7 years ago
I thought you could use the entitlement again if you refinance, for example from a VA loan into a conventional loan.
Malinda Gibbons-Gwyn, almost 9 years ago
Thank you for the information and is ver valuable since the VA home hack is how I would like to start my investment career.
James Sampson, about 9 years ago
great post, @Tyler Flagg !
One question I've been trying to find an answer to from a verifiable source is whether you become exempt from the one year, owner occupancy requirements if you PCS before your one year is up. Might you be able to shed some light on that for me?
Thank you kindly!
Jessica Skupien, over 9 years ago
Hey Jessica,
Great question! And one that is definitely hard to find a good answer on lol. I combed through the VA loan program documents as well as the VA Lender's Handbook, and wasn't able to find anything that specifically stated an answer to that. However, here is what it says under "The Law on Occupancy"
"The law requires a veteran obtaining a VA-guaranteed loan to certify that he or she intends to personally occupy the property as his or her home. As of the date of certification, the veteran must either
personally move into the property and use it as his or her home within a reasonable time."
From the lenders I have spoken with, as well as the articles I've read on the topic, there is an emphasis on the word "intends" in the above rule. As long as you "intend" to live there, you wont be faulted for receiving PCS order within 12 months. Obviously, that kind of thing is outside of your control.
Prior to taking out a VA loan though, I would definitely call up your local VA regional office and ask them to give you some reassurance on the matter. Here is a list of numbers.
VA Regional Offices
Hope this helps! Best of luck to you.
Tyler Flagg, over 9 years ago
I contacted the regional office after discussing what I was I was going to do with my bank. They emphasized the "intends" portion several times, but said that life happens and that I could move at almost any point really. Also, they did stress that timely manner, saying "usually within 90 days." However, I could not find that written anywhere either.
Tyler Kaye, almost 9 years ago
@Tyler Flagg great post. I am a veteran as well. My real estate agent has always suggested I use conventional or FHA financing instead of VA. I will be checking your blog posts to see if you have written about your experiences using it.
Brandon L., almost 10 years ago
I know it's been a while @Brandon L., but if you have an agent that is discouraging you from using your VA loan, I would look for another agent. Any knowledgeable, competent mortgage broker or Realtor knows that VA is the absolute best loan out there- unless you're wanting to buy an uninhabitable home. Many agents (& a few lenders) discourage veterans from using their hard-earned benefit simply because they are uneducated about the many benefits or simply don't know how to do the paperwork. Either way, they're either incompetent, lazy, or both.
Shawn Devoid, over 7 years ago
@Richard G. Thanks for the post! Since most people using a VA loan are normal home-buyers (as opposed to investors) the VA wants to make sure that the home is free of hazards so that the occupants are safe. Therefore they have a list of Minimum Property Requirements regarding everything from adequate roofing, to proper drainage, and even basic utilities. I'll write about MPR in my next blog post this weekend, so hopefully I can get you an answer about your 'fridge situation. Best of luck!
Tyler Flagg, almost 10 years ago
Great post @Tyler Flagg.
Useful additional information @Andrew Martel.
But please explain MPR? This sounds like a situation I was in recently where I was looking at a REO property and a co-worker told me that I cannot use the VA loan because there is no refrigerator and basic utilities inside the residence? Is that what you mean when you talk about
Minimum Property Requirement, please advise -- Thanks.
Richard G., almost 10 years ago
I just purchased my home earlier this year with my VA loan. It was a forclosure with no appliances. The city inspector for the C of O 10X worse than the VA inspector.
Jason Bejger, almost 10 years ago
@Andrew Martel thanks for the great info. I'm going to dig a little bit further and see what other bits of gold I can find in the regs. I'll be sure to let you and @Spencer Feliciano know when I post another. Take it easy!
Tyler Flagg, almost 10 years ago
Hey Tyler,
Great info! I'm actually about to throw down on my second VA loan for my upcoming PCS.
Here's a few things I've learned along the way:
-Second VA loan (bonus entitlement) has a higher funding fee and must be over 144k (Last I checked)
-You can use VA to buy foreclosures, short sales, auctions etc. HOWEVER, they have to meet the VA's MPR's (Miniumum Property Requirements). This is a big deal, becuase I love foreclosures... so this can really impact the quality of the home you are allowed to buy. If it doesn't meet the MPR's you may not be able to acquire the home through this fiancing method.
-Once you use your VA certificate, either the first or second one, you cannot get it back unless you actually sell the home... even if you pay the loan off, the certificate remains attached to the deed.
I'm in the GAL. Drop me a line if you want to chat.
Hope this helps!
-Andrew
Andrew Martel, almost 10 years ago
Thanks for the insight Andrew. I've been trying to figure out if it was possible to reuse the entitlement after paying the original loan off but I guess I'll have to really make it count.
Account Closed, almost 10 years ago
Even if you refinance you loan to conventional? I was told my va certificate was "freed" after I did that.
Mary lou L., over 9 years ago
I have done this, and it was really easy for me to request the certificate again. I am not sure what experience you have had, but it just took me the time to login and request it. A few days later I received an electronic copy of it.
Tyler Kaye, almost 9 years ago
Actually, I was really curious, too! So I did look it up- this is what I found in the VA Lenders Handbook, Chapter 2: Restoration of Previously Used Entitlement:
"Restoration of previously used entitlement is possible if
- the property which secured the VA-guaranteed loan has been sold, and the loan has been paid in full, or
- an eligible veteran-transferee has agreed to assume the outstanding balance on a VA loan and substitute his or her entitlement for the same amount originally used on the loan. The assuming veteran must also meet occupancy, income, and credit requirements of the law."
However, there is always an exception (but this time, only once): "... or the prior VA loan has been paid in full, but the veteran has not disposed of the property securing the loan. The veteran may obtain restoration of the entitlement used on the prior loan in order to purchase a different property, one time only. Once such restoration is effected, the veteran’s COE will indicate the one-time restoration. It will also advise that any future restoration will require disposal of all property obtained with a VA loan." Hope others find this useful. I plan to get all the equity I can out of my rentals, to fund more deals, so it will likely never be an issue for me :)Shawn Devoid, over 7 years ago
Tyler, I'm still learning about the VA as well. Good stuff that I didn't know. It's funny how little most realtors/bankers know about this program! Another fact, you can have multiple VAs at one time up to a limit of about ~417k (last I checked) as long as it is used as a primary residence for a year or until a PCS. This was huge!
Frankie Woods, almost 10 years ago
Tyler Flagg, almost 10 years ago