VA Loan

14 Replies

My name is Alex Filipe and I'm an aspiring REI. I plan to start my venture through a VA loan. I've been reading a lot about VA loans but can not seem to come across this specified question regarding them. Its stated that one can only acquire a max of 2 loans and no more until loan is paid off and no longer exist. But what if i take the burden of the loan of them, get the benefits of the low interest rate lets say 3%. Through a 3rd party some random bank or credit union refinance it through that company at get that same 3% or in same ball park, therefore freeing up the loan originally purchased though them. Would that not allow me to in theory allow me to acquire another loan through them and repeat until I'm satisfied?

For a VA loan, you must live in the property for a time, about a year, before you can move out and rent it.

If at that time, you decide to refinance it, you will have to come up with at least 20% down for the refi because I assume you would be putting no money down on the VA loan and most banks won't refinance with no equity in the house.

If you have no money to put down now, can you come up with 20% in a year?

An alternative way is to buy a duplex, triplex or quad with your VA loan and live in one unit, rent the others, and in a year move out. Leave the VA loan in place and now you'll have four units that you are renting for essentlally $0 down.

Originally posted by @Brooks Rembert :

For a VA loan, you must live in the property for a time, about a year, before you can move out and rent it.

If at that time, you decide to refinance it, you will have to come up with at least 20% down for the refi because I assume you would be putting no money down on the VA loan and most banks won't refinance with no equity in the house.

If you have no money to put down now, can you come up with 20% in a year?

Thanks for the response I think I was a little unclear with what I was intending to say but you still did answer my question. I was intending to see if I was able to refinance the VA loan through a third party but as you answered it I can. The 20% down wouldn't be my concern but instead the interest rate on the property. If VA offers me a low interest rate and in return once I get it refinanced through a third party keeping that same low interest rate which are hard to achieve with once starting up. 3% interest rate sounds a while lot better than 10%.

Refi will require a new interest rate, but rates are really low. Shouldn't be too much of an increase. 

VA and traditional mortgage rates are not very different. You don't save much in the way of interest rate by going with a VA loan.

The spread will only be about 1% difference between a VA backed mortgage and an investment mortgage.

Brooks and Alexander thanks you guys very much for your help I was under the impression my first few homes would have a fairly high interest rate.

@Alex Filipe  

You can move into a property with 0 down with a VA loan. You can rate and term refinance with a conventional loan and keep going as long as you have the equity or the money to pay down the mortgage to get the LTV to support it. You can keep purchasing an owner occupied VA loan every year and refinancing if it works out for you.

Originally posted by @Jerry Padilla :

@Alex Filipe 

You can move into a property with 0 down with a VA loan. You can rate and term refinance with a conventional loan and keep going as long as you have the equity or the money to pay down the mortgage to get the LTV to support it. You can keep purchasing an owner occupied VA loan every year and refinancing if it works out for you.

Why yes that exactly what I had in mind. LTV was going to be my biggest obstacle to overcome. With this method you could essentially skip that process and acquire the portfolio that I would need. Thanks very much for your insight of things.

@Alex Filipe

Depending on how much of your VA loan you used on your first house, you might want to look into the Interest Rate Reduction Loan (IRRL, www.benefits.va.gov/homeloans/irrrl.asp) program, often called a VA streamline.  It allows you to keep the 0% down, wrap additional closing costs into the refinance, and if you're going from a fixed rate to another fixed rate, the new rate is required to be lower than the original loan.  It removes the requirement for you to occupy the house.  You just have to certify that you occupied the house at one point.  

You can get another VA loan with 0% down as long as your within the loan limits for your county. You can find that info here:

www.benefits.va.gov/homeloans/purchaseco_loan_limi...

This obviously isn't scalable for more than a few properties since the purpose of the VA loan is to help veterans purchase homes for personal use, not to help investors make money with nothing down. Just make sure you're not hopping from property to property and abusing the system. As long as your following the rules and living in the property for a year, you should be fine.

@Alex Filipe upon refinancing you will get a new interest rate depending on the market at that time and yes you do still have to meet LTV requirements. If you successfully refinance to a conventional loan that does free your entitlement so you can use that on another property, up to 2 at any given time under VA loan and you must owner occupy at the time of obtaining the original VA loan.

As @Brooks Rembert has stated, if you have the LTV there isn't much benefit to go VA over conventional because the biggest benefit to VA is 0% with no PMI. What many people don't factor in however is the VA still charges for this benefit through a funding fee, which could be about 1.5-3% of the loan. That being said, if you have any VA recognized service connected disabilities they will wave the funding fee.

Originally posted by @Tom McLemore :

@Alex Filipe

Depending on how much of your VA loan you used on your first house, you might want to look into the Interest Rate Reduction Loan (IRRL, www.benefits.va.gov/homeloans/irrrl.asp) program, often called a VA streamline.  It allows you to keep the 0% down, wrap additional closing costs into the refinance, and if you're going from a fixed rate to another fixed rate, the new rate is required to be lower than the original loan.  It removes the requirement for you to occupy the house.  You just have to certify that you occupied the house at one point.  

You can get another VA loan with 0% down as long as your within the loan limits for your county. You can find that info here:

www.benefits.va.gov/homeloans/purchaseco_loan_limi...

This obviously isn't scalable for more than a few properties since the purpose of the VA loan is to help veterans purchase homes for personal use, not to help investors make money with nothing down. Just make sure you're not hopping from property to property and abusing the system. As long as your following the rules and living in the property for a year, you should be fine.

 I'll have a look into that. Thanks. No wasn't planning on using it to scale but simply have a starting point.

@Alex Filipe I've been notified by the VA in the past that even though I have re-financed (previously VA-acquired properties) the fact that I still own the property and have an existing VA loan, that I WOULD NOT be able to obtain any further VA LOANS until I dispose (sell) one of the properties. Regardless if the property is still under a VA loan. So, based on my discussion, they were tracking on the fact that I have acquired 2x properties with VA loans AND still own them and until I get rid of one of them I would not regain eligibility. I would LOVE for someone to prove to me otherwise. To be clear, this is NOT THE SAME as having 2x VA LOANS simultaneously.

@Jerry Padilla Can you buy a house with a VA loan then refinance it with another bank to get your equity out of the house in less than a year? For example if a buy a house with VA for 100k, that is worth 200k, then find a bank to refi it at 80%, which will give me 60k. However, I will have to take 40k, the 20%, to put into the loan. Leaving me with 20k left over in less than a year.

Also do I have to still live in the house for the year to follow the VA rules even if it is under the new loan? Could I buy a second house with the VA loan in the same year?

Updated almost 2 years ago

I made and error. I would have 60k left after the refi. Not 20k. Shouldn't give the bank more than it needs...

@Matthew Carducci Would it be possible to repeat the process and build your portfolio, if you "sold" one of the properties to a business/LLC that you owned? This was an Idea I had, but I wasn't sure if I'd be able to get away with it. Have any Idea?

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