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Posted over 9 years ago

3 MORE VA Loan House-Hacks for the Newbie Military Investor

This article is a continuation of my last blog post entitled 3 VA Loan House-Hacks for the Newbie Military Investor. Please feel free to check that one out first if you so choose. 

The two documents that I will be referencing throughout this article are as follows.

Title 38, Part 36 – “Loan Guaranty”

Lenders Handbook - VA Pamphlet 26-7 

Now on to the good stuff...

#4) When you move, you can rent out your property instead of selling it…without losing your VA loan benefits. The IRRRL (Interest Rate Reduction Refinancing Loan) allows you to maintain many of the benefits of a VA loan, even though it is no longer your primary residence.

36.4306a –

Interest Rate Reduction Refinancing Loan

(a) Pursuant to 38 U.S.C. 1810(a)(8) and (9)(B)(i), a veteran may refinance an existing VA guaranteed, insured or direct loan to reduce the interest rate payable on the existing loan provided the following requirements are met:

(1) The loan must be secured by the same dwelling or farm residence as the loan being refinanced; and

(2) The veteran must own the dwelling or farm residence securing the loan; and

(i) Must occupy the dwelling or residence as his or her home; or

(ii) Must have previously occupied the dwelling or residence as his or her home and must certify, in such form as the Secretary shall require, that he or she has previously occupied the dwelling or residence; or

(iii) In any case in which the veteran is on, or was on, active duty status as a member of the Armed Forces and is unable, or was unable, to occupy the residence or dwelling as a home because of such active duty status, the spouse of the veteran must occupy, or must have previously occupied, such dwelling or residence as the spouse's home and must certify to that occupancy in such form as the Secretary shall require.

#5) In order to purchase a property using the VA loan, it must meet Minimum Property Requirements (MPR). These requirements differ slightly depending on whether the property is under construction or was already built, according to the “Lenders Handbook – VA Pamphlet 26-7”

Chapter 12 – Minimum Property Requirements

Overview

“In proposed or under construction cases, the MPRs help ensure that the property is constructed according to the applicable

  • building code
  • Federal regulations, and
  • HUD requirements.

In existing and new construction cases, the MPRs provide a basis for determining that the property is

  • safe, structurally sound and sanitary, and
  • meets the standards considered acceptable in a permanent home in its locality.

Therefore, as you can see, the rules are a bit more lenient when it comes to homes already built. The VA Pamphlet goes into detail about MPR with regard to everything from heating to water supply, and roofs to crawl spaces. So if you want more detail, please check out the link above. From the standpoint of an investor who is looking to purchase and fix an imperfect property, the following phrase is key.

Chapter 12 – Minimum Property Requirements

12.01 MPR Variations and Exemptions

An MPR for existing construction can be waived by the VA field office if

  • a veteran is under contract to purchase the property, and
  • the veteran and lender request the exemption in writing, and
  • the property is habitable from the standpoint of safety, structural soundness and sanitation, and
  • VA is satisfied that the nonconformity has been fully taken into account by way of depreciation in the VA valuation.

#6) There are no maximum Loan Amounts within the VA Loan program…kind of. The following quote comes directly from the Lenders Handbook – VA Pamphlet 26-7.

Chapter 3 – The VA Loan and Guaranty

3. Maximum Loan

“Unlike other home loan programs, there are no maximum dollar amounts prescribed for VA-guaranteed loans. Limitations on VA loan size are primarily attributable to two factors:

1. Lenders who sell their VA loans in the secondary market must limit the size of those loans to the maximums prescribed by Government National Mortgage Association (GNMA) or whatever conduit they use to sell the loans.

2. VA limits the amount of the loan to the reasonable value of the property shown on the NOV (Notice of Value) plus the cost of energy efficiency improvements up to $6,000 plus the VA funding fee, with the following exceptions.”

Whereas this may be true, the VA does in deed have limits on the amount of the loan that they will “guaranty”…but more on that next time.

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Hope this helps. Best of luck to everyone!

Sincerely,

Tyler Flagg



Comments (7)

  1. @Tyler Flagg - I am a Vet and I was told by my broker that I wasn't allowed to buy a multi-family property with a VA- ever. But from your article and other comments I am hearing that it isn't true. Next time I will go with a different bank and broker! I also was curious where you found all of these VA home loan regulations? Thank you.


  2. Hey @Tyler Flagg, I appreciate the blog posts for the newbie military investor. 

    I was wondering if anyone has any experience in purchasing a multi-family with a VA as their first time purchase? I am working with a mortgage broker and he came back to tell me I am not able to purchase a 4-unit as a first time home purchase with a VA loan without any experience? Doesn't sound right at all. I could stomach the idea if it was because of income requirements. Curious if rental income can also help to qualify for the loan. Any contact suggestions would be much appreciated if you have them! Thanks!


    1. Hey Sajili. Sorry to hear you're having issues. I've read through the VA Lenders Handbook as well as the governing regulation a few times and never saw anything about that. If it was me, I'd ask him to point to the regulation that says you need landlord experience. If that doesn't work, I'd shop around for a different lender who is more familiar with the process. There are a number of BP members who have successfully done this in the past, so hopefully you'll be able to get a lender recommendation. Best of luck!


  3. Newbie question here.  How can you do multiple VA loans?  I've been told by several lenders that only one is allowed at a time.  


  4. @Frankie Woods no problem at all! I'd love to hear about how the refinancing process works under the VA program. 

    @Sara Cunningham thanks the message. Funny you should mention that, because I just actually came across the document that outlines the high cost areas limits today. Hope the appraisal works in your favor. Take care!


  5. Hi Tyler, what you say is true. We still own what was a primary residence in Oklahoma City under a VA loan. We rented it out when we went to Italy 3 years ago. We are now in the process of buying another primary residence just outside DC in MD. 

    There is a limit on what they loan against a VA but it varies in each market. For example here it's a maximum of $692,000. We have an offer accepted right now on a bank REO and I'm hoping the Appraisal comes in lower than the agreed price. One good thing about VA appraisers they are very strict on what has to be working and the condition of the property. 

    Sara


  6. Very useful info.  I currently have two VAs, but I'm considering refinancing to "rinse and repeat".  Thanks for sharing!