How to free up you VA Loan Entitlement

1 Reply

Good Afternoon BP,

This is a question for fellow veterans who have bought a duplex or multi-family in the past and then went on to move out of the property to purchase a second.  After a few years of searching I have found my ideal duplex (I'm way too picky) and am looking to buy it with no money down and inhabit it until I want to improve my living situation.  Ideally I would do this with a more expensive duplex after a year or two.  The home I am interested in purchasing is going to be around $265K in MA.  The max entitlement in my county is $417K.

The Big Question is how do I free the $417K back up when I'm ready to move on.  Can I refinance the initial loan into a different type of loan through a different bank ?  Do I need a certain amount of equity in the property in order to do that?  Since I'm going to be $250K in debt, am I going to run into major issues qualifying again.  Will I be able to prove income when this happens?

I feel as though I've always just assumed that it would work itself out without performing my due diligence. I also love the idea of not paying a mortgage and living for free which is why I've liked the Duplex/VA Loan idea. It seems like there isn't a lot on the message boards about what to do after your first purchase though. Hopefully we can get a string here that clears it up and lays a blueprint for us veterans moving forward.

Eric Dufault, Real Estate Agent in MA (#9550703)
@Eric Dufault  Thank you for your service.

The only way to free up the total VA entitlement is to sell the property or refi it away from the VA loan. To refi the property he will need to have documented income to support the debt. If he has enough equity then he can avoid PMI. Depending on when he does the refi, it can be a conventional loan or an investment loan.

That does not mean that your friend is completely out of luck. If certain criteria are meet, then he can get a 2nd VA loan and use the left over entitlement. 

If he is looking to refi the property away from a VA loan and at the same time get a new VA loan for a new property, then it would be in his benefit to work with a single mortgage banker to do both the loan, as that banker can explain it to the underwriter.

Good luck to your friend.
Upen Patel
Upen Patel, Lender in (#National Lender NMLS 1374243)
(571) 331-5161

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