House Hacking with a VA loan

[Gabi Ashenden]

Hello everyone,

My husband (veteran) and I bought a house last year with a VA loan (0% down), and we lived in it for more than a year. We have been researching our market and are very ready to buy an investment property. We were prequalified for 400K at 8.4% (Ouch!). We have renovated the house we live in, and we put way more into it than we should have, because we didn't think we would house-hack it, and we made it customized to us.

Anyway, we are thinking about renting the house that we live in right now for a year and moving into another house that we will house-hack, probably upgrade it with an intention of renting it in the future, and probably come back to the house that we live in right now. Here's what the loan officer told us: "You still have entitlement left over that you can use if you choose to make this property your primary residence. Long and short, if you were to buy a primary residence at $500,000 you would have to put down 6%.".

What are your thoughts at the moment? I think it's a great idea, but what are the downsides of using a VA loan for house-hacking?

[Gabi Ashenden]

Quote from @Andrew Postell:

@Gabi Ashenden is that 8% rate for your primary home? That seems awfully high to me. Now, I have used my VA loan multiple times and firmly believe in using it when you can. Are there draw backs to it? Yes, but the positives usually out weigh the drawback. Your loan officer should know these things too...hopefully. The main draw back is the funding fee. And depending on the veteran's disability rating it could be as high as 3.3% of the loan amount. However, you have to PMI. So your payment will still be lower than any other loan amount. Same with the interest rate too - the interest rate would ALSO be significantly lower than most other loan types. So, that higher fee...is usually outweighed by the other benefits.

Hope all of that makes sense.

Hi Andrew! That's very helpful, thank you, we are planning to use the VA loan, which is offered to us at 6.4%. The 8% I mentioned was for the loan we would take if we would buy the property as an investment property, that would be a different loan if that makes sense. We will definitely look into the funding fee, thank again!