Refinance from VA loan to conventional

18 Replies

My wife and I bought our first home with a VA loan. I've heard it's a good idea to refinance to a conventional loan to enable the VA credit to be used again. How would I go about doing that and are there better loans to get. Any secrets or strategies to save as much as I can on interest and fees? Any advice for VA loan refinancing. What's the process to be able to use our VA loan again for another home, probably a rental property. Thanks

@Kenny Lewis when you refinance a VA loan it is important to ensure that you have at least 20% equity in the property. One of the nice things about the VA loan is that you are not required to pay Primary Mortgage Insurance (PMI), when you refinance the loan you may have to start paying PMI unless you have enough equity (or put down enough cash to create the equity). PMI can be expensive and will definitely eat into your cash flows if you are going to rent out the refinanced property.

I hope this helps some,

Allen Fletcher 

The VA loan requires you to owner occupy. if you are going to buy another place to live, then it would be a good idea to free up your eligibility again. Find a mortgage broker and look to refi into a conventional loan. It would be no different than any other refi process.

Remember you cant use your VA to buy rentals. You can rent if you have to PCS, then buy in another location, but the VA will scrutinize if you are trying to buy for a rental. When you use your VA loan, you will sign a rider that says you will Owner occupy within a reasonable amount of time. usually less than 60 days.

with all that said, the VA will loan on multi family up to 4 units, so if you are going to use your VA, find a 4unit and use the VA loan with zero out of pocket.

thank you Allen and Aaron. We will eventually be pcsing back home to CA. So we were thinking of refinancing the house we own now to gain eligibility to use for another property. And when we do pcs back home we will be able to rent it out. Correct? The multi family unit sounds very interesting. Does that mean we could buy a duplex or four plex with our VA loan and rent out 3 of the units? Would we have to live in one of the units though?

Correct, you will have to live in one of the units.

When you use it again there is a fee now to use it again. I think about 3500.00 but to me it is well worth it not to have the PMI and its still zero down. They will roll in the cost of using the loan again. I have used mine 3 times to date and you can buy a multi-family if you occupy one of the units. Good luck and thank you for your service.

thank you Charlie...additional question. What if I don't have 20% equity in my house? Will I still be able to refinance?

Yes usually they have promotions that will go up to 95 or 100% value. I use Navy Federal Credit Union. They are a bit slow in processing but very military friendly. I also use USAA but NFCU works with me best. For a new VA loan recently I uses IFREEDOM which does Va's loans and they were a bit less costly. They were awesome and kept in touch constantly to get the loan done.

@Kenny Lewis

I recommend you talk to your VA benefits rep. You do not need to refinance to a conventional loan to use your VA again. I am buying my second home using VA while my first is still a VA guarantee loan. Yes, as mentioned previously, there is a higher origination fee (roughly 3.5% of buying price) but still no down payment or PMI. That origination fee can be added to overall loan amount depending on your lender.


thanks JT. Now that you mention that, I remember hearing something about being able to use the rest of my eligibility into a new property. Because I know there's a certain amount of eligibility I have and if I don't use all of it, I can use the rest of it on another one...example, say my eligibility is 300k and I get a loan for 150k, I have 150k left to use. Correct? Let me know if I'm right or wrong. Thanks

BUT....the lingering question still remains...could l rent out my house now with my VA loan then live in my next home I buy from rest of VA eligibility? Or vise versa...

@Kenny Lewis ,

Yes you can rent out the house. I used the same strategy @Charlie DiLisio used and that you are attempting to use to buy my first two houses. Both were primary residences that I turned into rentals. I still own both of them and still have the VA loan on the second. I have also used NFCU's 100% financing options (3rd house, converted to rental, still own).

You can get two VA loans if you have enough eligibility. Having bought here, though, and looking to buy in CA might be beyond what your eligibility will support.

thanks Edward. How were you able to rent out the properties with VA loan? File paperwork? Just did it? Also, if I am able to buy another home with my VA eligibility, I would buy it in VA. Since we probably won't be stationed in CA for another 2 years. Would I have to move to the newest house? Or can I stay at my current house and rent out the new one?

@Kenny Lewis , assuming you have been in your current residence for 1 year then you can just rent it out. You signed a document when you got your loan saying that you intended to live there for a year when you bought so it is best to live up to that. There is no special paperwork to fill out if you convert it to a rental. The house is yours and you may do as you please.

Any time you use your VA you will sign documentation that you intend to live there for at least a year. So yes, you would have to move into the new home.

Ok. Understood now. We JUST bought our house so we have 11 more months. Ouch. Is there any way to be able to use the rest of my eligibility to buy another home before the 1 year mark? Or will I have to refinance to conventional?

@Kenny Lewis , ethically, no. If you are PCSed, the one year requirement does not hold. Or if your situation changes drastically (divorce, family expansion (child on the way or parent moving in, etc.)). The point is you should be able to in could conscience show that you honestly intended to stay in the home for a the year requirement but due to circumstances beyond your control you cannot fulfill that intention. Unethically, I am sure there are a number of excuses that you could think of to explain why you cannot live up to your agreement. That is not a good way to start out in this business, though, at all.

Originally posted by @Kenny Lewis :

Ok. Understood now. We JUST bought our house so we have 11 more months. Ouch. Is there any way to be able to use the rest of my eligibility to buy another home before the 1 year mark? Or will I have to refinance to conventional?

If you get orders, you're good. Hell, you're good if you get orders two WEEKS after buying a home using VA financing.

Note that if you buy a multi-unit using VA and cannot support the debt obligation on your own and your wife's income, you can NOT use expected rental income from the other units as income without prior landlord or property management experience. Normally we don't worry a lot about DTI for multi-unit house hacks so long as the deal makes sense, VA house hacking is a little dicey.

Note also that for VA loans and multi-unit, the local SFR loan limit applies. None of the magical "FHA 3.5% down $1.2m loan amount fourplex zomg!!" stuff with VA.

Also remember everyone, that if the 3.5% funding fee for your 2nd + VA loan seems a bit excessive, you can lower it back down to 1.5% if you put down 5% on the house. I recently did this with my 3rd VA loan. In the long run, it was cheaper to pay 5% down, and the 1.5% funding fee than the straight 3.5%. It saved me over 10K, but took some cash upfront to do.

Hi everyone! My fiancé and I want to do the same steadies just mentioned above. We moved into home after 214 and got a SFH WIH VA. We have just finished one year in the home and want to find the details of how we can refinance and move into a 3/4plex and rent out this home so we can get closer to that sweet financial freedoms we hear about. Does anyone have a step by step what we should be doing next?

From what I’ve read:

1. Talk to VA rep to find more about my loan limits and fee for moving

2. Refinance VA to another loan so we free up VA loan to use on multi family.

3. Rent out this house

4. Buy move into multi family

Does anyone know where/ how we should be running “numbers” so we know we will not be making major rookie mistakes?

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