Should I use my VA loan on my first investment?

Question

I’ve been really considering utilizing a VA loan on my first investment property.. I’ve been approved for roughly 200K.. what are your thoughts??

Chris Mason · Answer

Every single person I know who is in the mortgage industry, who is eligible for a VA loan, is personally in one or more VA loans. Myself included. That really should tell you everything you need to know.... lowest common denominator: if every car salesman, regardless of brand they were selling, personally drove a Toyota, then everyone needs to buy a Toyota, that's obviously the best car, that's why everyone selling Fords or Teslas personally drives a Toyota. Perhaps that is a silly example since it is not true for cars, but consider how much more impactful it is for mortgages, since it literally IS true for mortgages. I'm out here advising folks on Conventional versus FHA, and that sort of thing, but then when it's time for me to personally get a mortgage, I'm turning around and applying for a VA loan no question about it.

This isn't unlike the GI Bill. "Hmmmm do I go $150k into student loan debt, or do I use a benefit program that I already put the work in to qualify for? Gee, lemme think about that..."

(For those of you that can't get a VA loan, I have a super easy solution. Please call 1-800-Marines, do what the nice man says and sign where he tells you, post back in 4 years, and we'll get you sorted with your VA loan!)

This isn't unlike the GI Bill. "Hmmmm do I go $150k into student loan debt, or do I use a benefit program that I already put the work in to qualify for? Gee, lemme think about that..."

(For those of you that can't get a VA loan, I have a super easy solution. Please call 1-800-Marines, do what the nice man says and sign where he tells you, post back in 4 years, and we'll get you sorted with your VA loan!)

Cory Wallace · Answer

@Scott Kelly that isn’t against the rules. As long as you owner occupy for one year you met the obligations.

John Walter · Answer

I am under contract for my first multi-family right now and I am using my VA loan. Are you service connected at all? If so, your VA funding fee can be waived, saving you thousands (over $11,000 for me).

Highly recommend using this benefit as it allows you to have others pay your mortgage, while freeing up your cash for other investments.

Mead Lyons · Answer

I'm looking at doing the same thing for my first home purchase. I am looking for a multi-family, live in one unit until I move and then rent out. Specifically in Columbia, SC. I know there are a lot of Service Members that take this approach and turn their homes into rentals each time they PCS and by the end of a career have a nice little portfolio with some good equity!

Mead Lyons · Answer

Im pretty sure the deal is, if you move out of the house and refinance it with a conventional loan, now your VA Loan is able to used again.

Alejandro Calixto · Answer

Thanks for the shout out @John Warren.

@Brandon Singleton, I agree with John. The VA loans are just too convenient not to use. The fact that you can usually come out with a better interest rate, no money down and no PMI is so advantageous. It seems you're on the right path already. If you can find a 4-unit that cash flows or at least drastically reduces your out of pocket housing expenses in your market then you can take leaps while others take steps. As others pointed out, there are a couple things that come with. First you need to plan on staying at that property for at least one year. Since you're already planning on doing this then you should be good. But if you have to move duty stations in the middle of that year then that can be different. Another thing is when buying with a VA loan they require an additional inspection done by the VA side. They tend to want the property to be totally livable and can be picky on certain little things (chipped paint on stair railing, for example).

Also, as you see the funding fee can be waived. For example, if you receive VA disability compensation the funding fee could be waived. When it comes to your original question... my thoughts are go for it! You're looking in the right direction.

Feel free to reach out if you need anything.

Mark H. Porter · Answer

I used my VA on my first investment purchase 23 years ago.  My first purchase, 3 units for $132K, I was scared to death.  But. it allowed me to get into the game with little risk.

It went through its transitions over the years as many are aware of during the late '90's early 2Ks.  Lived in one unit, added a fourth, refinanced for cash out, took the money and bought another property, did it again, etc...  Finally moved out 10 years ago after I had 4 properties altogether.

My suggestion would be that since they guarantee the loan for up to 4 units that that be your goal.  You'll live in one while collecting three rents.  Much lower risk than a duplex or SFH.

Scott Kelly · Answer

@Brandon Singleton

Unless VA rules have changed, they require you to use this benefit for your primary residence only.  There are places on the documents where you will sign attesting to it.

I have twice moved from my primary residence with a VA loan on it and left them behind as rentals.  While technically also against the rules, no one really cares as long as you keep making the payments.

Be careful not to lose your benefit and good luck!

Brandon W. · Answer

You may be better off with FHA.  Don't forget the VA charges a funding fee.  For 2020, the first time you use your VA loan this fee is 2.3% of purchase price.  Consecutive times using the VA loan it increases to 3.6%.  This funding fee is not a down payment, it is a fee that does not go towards the purchase.  One benefit however is that VA loan doesn't require PMI whereas FHA does.  You'll need to weigh those and see which works out better in your situation.

Brandon

Should I use my VA loan on my first investment?

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