VA Eligibility Restoration - Deed Property to Entity?

Question

The VA guarantee has been an amazing resource to me so far, mostly due to being able to enter small multifamily deals with low and no money down. However, I'm at the point where I've exhausted my VA eligibility and I'm investigating strategies to restore it.

According to the official VA website (www.benefits.va.gov):

I am considering refinancing the loan and deeding it to an LLC. If I were to do that, I assume on paper the property would be considered "sold" and the loan "paid in full" - does anyone have any experience with this? Or is there some sort of an at-arms-length requirement to the transaction that this would violate? Any military or mortgage brokers with experience restoring VA eligibility would be extremely helpful. Also willing to consider other possible strategies here.

Chris Mason · Answer

@Brendan Morin - you're over-thinking there, Airman. :)

All you have to do is refinance the VA loan(s).

Refinancing a mortgage, any mortgage, automatically involves paying the old loan off in full. Once you refi out of VA into conventional, the little VA Cert of Eligibility software is just going to go "does this SSN have any VA loans? y/n" and the answer at that point will be "n" because you refinanced out of it.

Brendan M. · Answer

@Theodore Freeman, thanks! Haven't heard anything yet. If I don't hear anything I'll probably try it and report back with my results.

Account Closed · Answer

If you refinance the VA Loan into conventional or FHA that will solve the problem.  The lender will take the closing disclosure from the refi and send that to the VA regional Loan center to restore the entitlement.  Allow about 2 weeks for processing, then your COE will show full entitlement.

You can also look into purchasing the next home using second tier entitlement. Depending on the new purchase price you may or may not have to bring a down payment to closing.

I have experience handling both of the above scenarios.  Feel free to PM me if you'd like assistance.

Matt Ashton · Answer

@Brendan Morin, one of the recent BP Podcasts had a Navy LT who does real estate in Pensacola.  He said something that I hadn't heard before reading the VA loan.   He said you could use your VA loan twice if your first property did not use up all the entitlement (I believe $417K in 2016).  In fact on the website (http://www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp) it says:

Remaining Entitlement

Veterans who had a VA loan before may still have "remaining entitlement" to use for another VA loan. Most lenders require that a combination of the guaranty entitlement and any cash down payment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less. Thus, for example, $23,500 remaining entitlement would probably meet a lender's minimum guaranty requirement for a no-down payment loan to buy a property valued at and selling for $94,000. You could also combine a down payment with the remaining entitlement for a larger loan amount.

Not sure if that helps at all but it might be something to keep in your back pocket.

Dan Gustavson · Answer

@Brendan M. - Looking to see if you were able to follow through with your plans and what the outcome was as I am looking to do something similar. Thanks!

Justin Franklin · Answer

@Brendan M. How did this workout for you ?!

Charles Choe · Answer

Hi @Brendan M., were you able to restore your VA loan entitlement without selling your most recently property purchased with VA loan? Thanks, Charles

Brendan M. · Answer

Account Closed, thanks for the input here!

Brendan M. · Answer

@Adam Schroeter - Good idea, I did this last time I had a VA related question and was expecting it to be a total waste of time, but the rep was actually well informed and able to answer my questions. I'll call again and post my findings here.

@Matt Ashton - I can definitely confirm that - I was able to use my VA entitlement on two 4plexes in 6 months. A deployment had made my 1-year residency requirement waiverable. The bank did request 25% on the difference remaining between the purchase price and my remaining entitlement amount. In the end it came out to around 10% of the total purcase price required for a down payment - I was pretty happy!

Chris Mason - Thanks for the advice here, I'll try to confirm that with the VA when I call on Monday.

VA Eligibility Restoration - Deed Property to Entity?

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