Question about timing w/ a VA cash out & conventional refi

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Question about timing w/ a VA cash out & conventional refi

Greg R.
Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes

Hello all,

I am currently working on a VA cash out (100%). Unfortunately, I got a really bad appraisal, probably about 15% low. I was considering going with another bank and trying my luck on another appraisal. However, I got to thinking and was wondering if I should maybe just run with the current appraisal, pull out the cash as intended, then refi into a conventional loan to free up my VA eligibility for another purchase down the road. In this scenario I'll have a lot of equity which should allow me to refinance into a conventional loan (and hopefully not need PMI).

In this scenario, how long would I have to keep the VA loan before refinancing into a conventional? I think I've heard 6 months in the past, but not sure if that's still applicable.

Any input would be helpful.

Greg

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Eileen L.
Rental Property Investor · Member since 2021 · 58 posts · 17 votes
4y

Hi there, 

I just did this recently - went from a VA to a Cash out Refi, but to Conventional. It was a good timing, since I now have 20% equity to not need PMI w/Conventional. I also got a low appraisal and couldn't take out as much as I hoped, but it all worked out. I would suggest just refinancing to conventional w/cash out now. If you go through a VA refinance, I believe you will have to pay the VA funding fees, which go up for a second time use, so about 3.25% if I remember correctly. It's just adding fees to your loan that are not needed if you plan to refinance conventional in the future. I live in California and wanted to free up my VA loan to eventually rent out my current house and buy another primary, so it was the best option for me. It's hard to have two homes under a VA entitlement with the prices out here. Also, my conventional loan paperwork states a year without intent to rent, but I believe that's the standard. Hope that helps!

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  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    4y

    Hey Greg-

    Thanks for your service!

    Low appraisals are the bane of the real estate investor's existance. I'm dealing with one today, as a matter of fact. If there's enough equity with your appraised value to do what you want, I'd just move forward. 

    Side note- you can have more than one VA loan at a time- there's a total dollar limit- something in the $750k range, but you can have more than one VA loan to add up to that amount. You might not need to do any of this, depending on your loan balance.

    Good luck!

    0Reply
  • Greg R.
    OP
    Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
    4y

    Hi Corby,

    Thanks for the time & response. Unfortunately this deal will eat up all of my VA entitlement. Being in San Deigo CA, prices are very inflated. Even with the low appraisal, this deal will result in a 975k loan amount.

    I'm considering moving later in the year. If that plan comes to fruition, I was going to buy conventional at my new destination. However, I'm thinking that if I take this deal (975) loan amount, if I could refi in a few months into conventional that would allow me to purchase my next property with the VA loan rather than conventional.

    Greg

    0Reply
  • Greg R.
    OP
    Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
    4y

    Anyone else out there that can answer this question? How soon after closing a VA refi can I refi into a conventional loan to free up my VA entitlement.

    0Reply
  • Eileen L.
    Rental Property Investor · Member since 2021 · 58 posts · 17 votes
    4y

    Hi there, 

    I just did this recently - went from a VA to a Cash out Refi, but to Conventional. It was a good timing, since I now have 20% equity to not need PMI w/Conventional. I also got a low appraisal and couldn't take out as much as I hoped, but it all worked out. I would suggest just refinancing to conventional w/cash out now. If you go through a VA refinance, I believe you will have to pay the VA funding fees, which go up for a second time use, so about 3.25% if I remember correctly. It's just adding fees to your loan that are not needed if you plan to refinance conventional in the future. I live in California and wanted to free up my VA loan to eventually rent out my current house and buy another primary, so it was the best option for me. It's hard to have two homes under a VA entitlement with the prices out here. Also, my conventional loan paperwork states a year without intent to rent, but I believe that's the standard. Hope that helps!

    1Reply
  • Greg R.
    OP
    Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
    4y

    Hi @Eileen L., thanks for your time and response. I considered that, but since my appraisal came in about 10-15% low, there wouldn't be much to pull out since I would need to maintain "x" amount of equity. With the VA, I'm able to pull out 100% of my equity which makes this deal enticing. I was considering taking the VA cash out, then refinancing into a conventional loan to free up the VA.

    Since the appraisal came in low, I would be able to pull out 100% and still have a fair amount of equity to refi into a conventional. 

    So I'm trying to figure out the time requirement... how fast I can refi into a conventional loan after I close the VA loan.

    0Reply
  • Amir Guerami
    Lender · Los Angeles, CA · Member since 2020 · 64 posts · 15 votes
    4y

    Greg-

    Thank you for your service and sacrifices. There is not wait time from going from a VA cashout to a conventional loan. The 6 month that you are referring to is going from VA loan to an IRRRL. Please remember that the VA loan can only be used to buy a principal residence. I think you have to be very careful in how you apply for each loan in terms of occupancy (principal vs. investment).

    0Reply
  • Nick BelskyBusiness Member
    Residential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
    4y

    @Greg R.

    210 Days per the VA Guidelines.

    Cheers!

    [email protected]
    Belsky Mortgage, LLC527 Reviews
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  • Greg R.
    OP
    Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
    4y
    Quote from @Amir Guerami:

    Greg-

    Thank you for your service and sacrifices. There is not wait time from going from a VA cashout to a conventional loan. The 6 month that you are referring to is going from VA loan to an IRRRL. Please remember that the VA loan can only be used to buy a principal residence. I think you have to be very careful in how you apply for each loan in terms of occupancy (principal vs. investment).


     Thanks for the time Amir. 

    0Reply
  • Greg R.
    OP
    Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votes
    4y
    Quote from @Nick Belsky:

    @Greg R.

    210 Days per the VA Guidelines.

    Cheers!


     Appreciate the info Nick. 

    0Reply
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