Originally posted by @Kevin Phu :
I'm trying to learn the best way to exit out of my VA loan. I currently have a VA loan on a 4br/2ba SFR that I am house hacking.
For the past year I have been renting out two bedrooms which covers more than half of my PITI. The goal of this purchase was to significantly lower my out of pocket expenses, which it has.
I have one tenant moving out and when I advertised the available room to employees at the govt agency I work for, I had 6 inquires on day 1.
I have no doubt this pool of available renters will be available for quite some time.
So theorectically, I could rent all four bedrooms out to individuals and cash flow on the property. That would leave me with no where to live though so I would have to find another property.
I could use an FHA loan but I don't like the idea of PMI for the life of the loan. What are some ways I can refinance out of the VA loan so I can use it again? I can pay 0% down and no loan fees because I am exempt from it.
This transition that you're asking about above is extremely important to transition smoothly and plan for because it will ensure your subsequent VA use for additonal purchases.
Once the current property is refinanced with a non VA loan this will free up your entitlement for additional use.
The max conv limit in Ventura county Ca is 672,750 and the max loan limits for a high balance loan can go up to 95%.
So what this means is theoretically you could refinance up to 672,750 loan amount with an appraisal as low as 708,158 dollars or higher before your loan is subject to jumbo/non conventional guidelines (much tougher to qualify for and has lower LTV's).
The VA loan has some key features that other loans dont have:
- a trade off of no monthly PMI but the upfront PMI is huge, equivalent to 2.15 - 3.30 Points (borderline hard money points). Most people dont focus on these because typical loan officers just say dont worry they are financed in your loan and you dont have to come out of pocket for them but still they are a huge factor in your total costs of financing. If you structure your VA loan strategically you can avoid the bulk of these VAFF's (VA funding fee's).
- no title seasoning on cash out refinances unlike FHA which has 12 months of title seasoning after purchase before you can use market value value or conventional which requires 6 months after acquisition (this applies to CO refinances where you used financing initially to purchase not DFE or delayed financing exception which is an all cash purchase and there is no lien/deed recorded on the property at the time of close), This becomes very handy for creative RE entrepreneur once you learn how to force equity through adding value to properties you can use VA's no title seasoning advantage to increase the speed at which you move from deal to deal quicker than Conv/FHA
- no self sufficiency rule when owner occupying 3-4 unit properties which FHA has (a rule that makes buying 3-4 unit FHA properties in high cost areas nearly impossible) so this a huge plus
- use of rental income or other peoples income (OPI) to help you qualify on your 2-4 unit VA purchase (FHA and Conv does allow this too)
There's a lot more you can do to optimize your mortgage planning from an investors perspective.
With the introduction of the 2018 Tax Cuts, you can structure your taxes strategically to not only greatly reduce the tax impact but also remain bankable to most money sources. This fine balance of tax reduction working cooperatively with your tax professional and being bankable is what I do on a daily basis with investors.
Best of luck.
@Kevin Phu - Maybe your rent is too low? Can you be creative and make an extra (maybe less desirable?) bedroom out of somewhere like a formal dining room and make that YOUR bedroom for greater cash flow? I took a “den” and made that my bedroom, turning a 4/3 into a 5/3 and I was making $500 more than my mortgage cost while living for free.
@Albert Bui - on point man.