VA loan refinanced to FHA loan?

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VA loan refinanced to FHA loan?

Jebo Aho
Aiken, SC · Member since 2016 · 15 posts · 1 vote
Hey All! I tried search the discussions for an answer but I couldn't quite get what I was looking for. I understand when using a VA loan you have to live in the home for a year. Does this mean you can rent it out after a year and get another VA loan? Now, am I wrong in thinking that the TOTAL amount that the VA will guarantee is $417k (give or take a few thousand)? So in my case, I purchased my home for $134k 0 down, no funding fee..Would this mean that after I lived my home for a year I would still have $283k left that the VA would guarantee? Even if all that is allowed, would it be better or even possible to refinance with an FHA loan? As you can tell I'm pretty confused, so if you need more clarity on the question I can try reword it.
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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    Did you find this website?:- http://www.military.com/money/home-ownership/how-f...

    From previous threads, my understanding is that once your first VA loan is issued, you can still utilize any of the allowable remainder (to total no more than $417k according to that website) when you move, without having to pay out the first loan.

    With an FHA-approved low-deposit loan, everything I've read suggests that you can only have ONE of those loans at a time, meaning that when you move but would still like the same type of loan for your next home, your first one would need to either be paid out, or, (as many seem to like the idea of), convert THAT loan into a conventional loan (which works best if your equity is already say 30% by then) before re-applying for another FHA-approved loan for your next primary.

    Anyone, if I'm wrong about any of that, please chime in. Hope that helps. All the best...

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  • Jebo Aho
    OP
    Aiken, SC · Member since 2016 · 15 posts · 1 vote
    10y
    Brent Coombs hey thank you for the info, I was just using FHA as an example. That was definitely s terrible example. I should have said refinance with a conventional loan. Now that brings up another question. When going with a conventional do you need to have 20% down even when refinancing?
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  • Rob Ringlehan
    Layton, UT · Member since 2014 · 41 posts · 3 votes
    10y

    I'm in the process of trying to assume another vets va loan. If it is your first property you can buy another home with the remaining balance and rent out the first property, which is what I'm trying to do. Also, after speaking to the VA regional office, there is no specific amount of time you have to live in the property just that you plan on moving in. I'm not a seasoned investor but I have been trying to put a deal together so I'm getting crasb course.

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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y
    Originally posted by @Jebo Aho:

    Brent Coombs hey thank you for the info, I was just using FHA as an example. That was definitely s terrible example. I should have said refinance with a conventional loan. Now that brings up another question. When going with a conventional do you need to have 20% down even when refinancing?

    Not if, by the refi time, you already have sufficient equity  (according to THEIR appraisal) to cover their Loan-To-Value ratio criteria. Cheers...

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  • Bryan O.
    Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @Rob Ringlehan VA loans typically require 1 year occupancy, just like FHA. Here is from my VA loan:

    6. Occupancy. Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower's control.

    @Jebo Aho. Once you have lived in the property for a year you can do whatever you want. You can rent it out, sell it, refinance it, etc. You can even use the VA refinancing as a non-owner occupant after you move out. You are also correct that you can use your remaining entitlement. Check around the site for "second tier entitlement". You can also refinance. Using FHA would be foolish, but conventional is common. A conventional refinance will want to see 20% equity, so if your value didn't raise by 20% in the year that you owned it you would have to bring that difference to the table. Once you have refinanced to conventional that portion of you VA entitlement is returned to you and you can use it again.

    Quick example: Value/purchase: $100k. In 1 year it is worth $110k. If you want to refinance conventional, you'll need $10. If it was worth $120k, you just pay your fees and refinance. Of course, keep in mind that it will have to be re-appraised to establish the current value and that is another cost you have to pay.

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  • Jebo Aho
    OP
    Aiken, SC · Member since 2016 · 15 posts · 1 vote
    10y

    @Bryan O.

    I was looking up the VA loan info and its quite annoying trying to read it when everything starts with "The Secretary...blah blah" but I did run into the second tier entitlement so I think I will start looking into that more. I just have to convince my wife that its a good idea to move into a duplex from a SFH, for 1 year. Haha. Thank you for the input! I appreciate it.

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  • Rob Ringlehan
    Layton, UT · Member since 2014 · 41 posts · 3 votes
    10y

    @Bryan O. Thanks for the clarification. When I spoke the VA Regional Office they said the time of occupancy can change depending on the lender as well.

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  • Rob Ringlehan
    Layton, UT · Member since 2014 · 41 posts · 3 votes
    10y

    @Bryan O. can you take a look at my thread and let me know what you think about a possible deal I'm working on?

    https://www.biggerpockets.com/forums/88/topics/358306-va-assumption-substitute-of-eligibilty

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  • Bryan O.
    Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @Rob Ringlehan the VA regs lay out beginning occupancy pretty well, but they do not specify the amount of time that you are supposed to occupy for, though commonly 1 year is the accepted amount. You are right that the lender may have their own overlay. Here is the actual section on occupancy:

    VA Pamphlet 26-7, Revised, Chapter 3, Section 5

    I haven't looked into VA loan assumption so I can't really give you any help for your other post.

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  • David Lilley
    Rental Property Investor · Dallas, TX · Member since 2016 · 261 posts · 170 votes
    10y

    Yes, Jebo, that is exactly right and exactly what I did to acquire my first rental. The remainder of your VA entitlement can be used on a second VA loan while keeping the first!

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