Refinance Exisitng owner occupied loan to conventional loan

Creative Real Estate Financing
9yFollow

Refinance Exisitng owner occupied loan to conventional loan

Juan Ayala
Rental Property Investor · Albuquerque, NM · Member since 2014 · 92 posts · 19 votes

BP Family

Looking for some advice on my current situation. I have a SFH in Los Angeles that I purchased as my primary home, Sep 2016. I purchased it using my VA loan for about $325,000. I now have military orders moving me to San Diego and want to use my VA loan but do not have enough left for a property in San Diego. So I am thinking about refinancing my home in Los Angeles into a conventional loan in order to release my existing VA loan. I have roommates in my Los Angeles home with leases, and make $3,400 in rent and only pay $1,800 in my current mortgage. I have leases and proof of rental income. I understand my interest rate might be higher if I re-fi this home, but need that VA loan to get a jumbo loan in San Diego. At the moment the property is valued at least $400,000 and my current note is $326,000. Based on my scenario what do you guys think is my best option? You suggest any other options? Thoughts please? Thanks BP Family.

1Reply
14 views

Most Popular Reply

Melvin ListBusiness Member
Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
9y

Conventional sounds like the way to go.  Have you tried @Chris Mason

C2 Financial
WebsiteView Page
1Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    9y

    Conventional sounds like the way to go.  Have you tried @Chris Mason

    C2 Financial
    WebsiteView Page
    1Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y
    Originally posted by @Juan Ayala:

    BP Family

    Looking for some advice on my current situation. I have a SFH in Los Angeles that I purchased as my primary home, Sep 2016. I purchased it using my VA loan for about $325,000. I now have military orders moving me to San Diego and want to use my VA loan but do not have enough left for a property in San Diego. So I am thinking about refinancing my home in Los Angeles into a conventional loan in order to release my existing VA loan. I have roommates in my Los Angeles home with leases, and make $3,400 in rent and only pay $1,800 in my current mortgage. I have leases and proof of rental income. I understand my interest rate might be higher if I re-fi this home, but need that VA loan to get a jumbo loan in San Diego. At the moment the property is valued at least $400,000 and my current note is $326,000. Based on my scenario what do you guys think is my best option? You suggest any other options? Thoughts please? Thanks BP Family.

     I agree with @Melvin List, refinancing it into a conventional mortgage to free up your VA entitlement seems like potentially a viable solution.

    1Reply
  • Juan Ayala
    OP
    Rental Property Investor · Albuquerque, NM · Member since 2014 · 92 posts · 19 votes
    9y

    @Chris Mason, copy that. Thank you fellas! I will PM Chris here shortly.

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    9y

    Thank you for your service to the country.

    I am not a mortgage specialist but getting the best rate and possibly highest LTV will occur when owner occupied. So the suggestion is to refinance it when you still have it as your residence.

    For my rental properties it is not easy to get LTV above 70% via conventional refinance loans (I have not gotten one in recent times). At the 70% LTV you will not be able to pull any money out of the RE. If the property appraises at $400K even 80% LTV would not allow any money extracted (Your current loan is at 81% LTV state if RE is valued at $400K).

    So you need an LTV above 80% for any extract of money. The VA loan has some good advantages but a big one is the high LTV but this also can constrain refinancing into a conventional loan (i.e. you need enough equity that you can get a conventional loan).

    Good luck

    0Reply
  • Kevin FoxPro Member
    Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
    9y

    Hey @Juan Ayala

    @Jerry Padilla is definitely who I'd talk to on this. He does a significant number of my clients' loans here in SD and has a ton of experience with both Conventional and VA financing.

    1Reply
  • Upen PatelPro Member
    Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
    9y

    @Juan Ayala Since you already have your order, make sure you do the refi to conventional as an investment property NOT owner occupied. Else you might be locked out of the VA purchase loan. Had you done this before getting order, you would have been fine.

    [email protected]571-200-6180
    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Juan Ayala:

    BP Family

    Looking for some advice on my current situation. I have a SFH in Los Angeles that I purchased as my primary home, Sep 2016. I purchased it using my VA loan for about $325,000. I now have military orders moving me to San Diego and want to use my VA loan but do not have enough left for a property in San Diego. So I am thinking about refinancing my home in Los Angeles into a conventional loan in order to release my existing VA loan. I have roommates in my Los Angeles home with leases, and make $3,400 in rent and only pay $1,800 in my current mortgage. I have leases and proof of rental income. I understand my interest rate might be higher if I re-fi this home, but need that VA loan to get a jumbo loan in San Diego. At the moment the property is valued at least $400,000 and my current note is $326,000. Based on my scenario what do you guys think is my best option? You suggest any other options? Thoughts please? Thanks BP Family.

    I'd be best to free up that VA entitlement so you can rinse and repeat like the BRRR strategy except with your entitlement from the VA.

    If your current SFR is worth 326k it should be relatively easy to structure a conventional refinance with no monthly MI thereby paying off the VA loan (restores your entitlement).

    The one issue you may come up with is the claiming of multiple "primary residences," within a relatively short period of time (under 6 months) but you do have a valid reason since you have change orders to relocate.

    VA entitlement can be a tricky thing when it comes to getting it restored as the VA administration is not the quickest and the regional center is out of Phoenix. A few calls to check in from your loan officer can help expedite the process a bit as you'll need it again to purchase your home with as little as 0% down in San Diego.

    The VA max limit in SD is 612,950 for 1-4 unit (doesnt matter with VA more units does not increase your limit like with FHA/Conv).

    You can always put down 25% of the difference above the 612,950 if you want to buy above the limit.

    0Reply
  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    9y

    @Kevin Fox Thank you for the mention! 

    @Juan Ayala A rate and term for an investment property will require a minimum LTV of 85% and 80% to avoid Mortgage insurance. As you are already aware with a refinance your interest rate will go up. VA is the best product out there. It looks like you are making out great on it as an investment property! So there is still room to profit on this house and accomplish your goal of purchasing in San Diego with VA.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free