How do I buy a new home and rent my VA financed home out?

Question

Aloha everyone,

Currently own a home in Hawaii that we purchased through a VA loan. My wife is getting relocated across island and looking a buying a new home.

Would anyone have any suggestions on the cheapest way to finance a second home that we intend to live in?

Mahalo

Jaysen Medhurst · Answer

@James Strider, first thing you need to determine is if your current home will actually make a good rental. Very often they don't. If it's not hitting the 1% rule (of FMV) with 25% equity, I doubt it's worth holding as a rental. Post the specifics here and the community will be happy to take a look.

As far a financing, I'm not an expert on VA loans, but if you can do that again, that's your best bet. I think you can do another VA loan as long as you don't hit the "cap," right?

Should you determine that your current house will indeed make a good rental, refi now into a conventional mortgage. You'll get better rates as an owner occupier than if you wait and refi it as an investment property. Navy Federal has bonkers good rates. Then do another VA loan for your new home.

OR look into a Military Choice loan from Navy Fed, if you want to keep the existing VA mortgage.

Brian Garlington · Answer

@James Strider  You may not need to refinance out of anything.............Just simply look at Navy federal Credit union my man. You can still get a 0 down sfr or condo with no PMI and keep your va loan in place on your first home.

Tyler J Askin · Answer

@James Strider Im not a lender, so I'd be doing you a disservice by suggesting anything specific.   My best advice is to ask around with your banks.  The banks, even the big ones, have an unbelievable number of products out their catered to specific needs.  USAA and Navy Fed can be incredible resources for vets too.  We are currently working with Wells Fargo, but I've done mortgages through USAA and local banks.

Tyler J Askin · Answer

We rented our VA mortgaged home out for several years.   There are no issues with that.  I suggest trying to refinance it before you move out.  The numbers never made sense for us, so we didn't do it.  We even ran into issues with Dod Frank rules when we looked into it (this was back in 2014, so it may not still apply).  The only way the banks we're allowed to refi was by going to a 20 year, which destroyed our cash flow.  Your numbers will be different though, so don't let our experience dissuade you.  Perhaps search for owner financing for your new home?

David Hooper · Answer

I don't know if the NFCU "VA-like" loan product would actually follow the VA loan limits in Hawaii, but if that works then it might be your best bet. The alternative of refinancing your current home -- definitely do that NOW before you move out of the home, then you can re-instate your VA benefit and re-use it. If you do the refi and the new purchase too close together you may draw scrutiny so you want to have a legitimate reason why you decided to move after refinancing, but if you refi after you turn it into a rental you're going to be hit pretty hard on the rate for an investment vs. a primary residence.

Please post/share what you ended up doing so we can all learn! Mahalo!

Collin Corrington · Answer

You have a certain allotment of what you can borrow under the VA.  https://www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp

From what I can remember you can borrow for two houses as long as you're under the cap where you live. Just make sure you have enough saved for when your renter's flake (and they will).  Otherwise, get it!  And have fun!

Tyler Dix · Answer

@James Strider research the "2nd tier entitlement" on the VA home loan

Duc Ong · Answer

@James Strider I was thinking of the ones with an Ohana unit. Of course, it depends on which area and how much you can qualify for.

Chris G. · Answer

@Duc Ong I’ve considered it but the inventory and zoning on Maui make it almost impossible. The few units I have seen are well over 1.2m

How do I buy a new home and rent my VA financed home out?

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